SINGAPORE The dollar struggled to advance on Thursday, even though Federal Reserve policymakers reiterated their commitment last month to fighting inflation, while the Aussie rallied after China eased its restrictions on imports of Australian coal.
Minutes of the December policy meeting of the Fed showed how officials agreed that the central bank should slow the pace of its aggressive interest rate increases, but they were worried about any misperception in financial markets that their commitment was flagging.
Minneapolis Fed President Neel Kashkari said on Wednesday that he believes the Fed's target interest rate will peak at 5.4 per cent, higher than current market expectations of just under 5 per cent.
The U.S. currency was down 1.4 per cent against the Canadian dollar overnight, but that didn't give a boost to it.
The pound was at $1.2062 at the end of the day, after rising 0.76 per cent against the dollar in the previous session, while the euro fell 0.19 per cent to $1.0624, following a more than 0.5 per cent overnight gain.
According to the Institute for Supply Management, the Fed's point of view is very premature to think about rate cuts in 2023, which is something the market still expects, but Ray Attrill, head of FX strategy at the National Australia Bank NAB Economic data released on Wednesday shows that U.S. manufacturing activity fell less than expected in November, and that US manufacturing activity contracted again in December.
The message is still that the labour market is in a pretty rude health, said Attrill, heading into Friday's payrolls.
The U.S. dollar index fell 0.14 per cent to 104.06, down 0.14 per cent against a basket of currencies, after slipping 0.5 per cent on Wednesday.
The Australian dollar rallied 1.7 per cent overnight on news that China's state planner has allowed three central government-backed utilities and its top steelmaker to resume coal imports from Australia, marking the first move since Beijing imposed an unofficial ban on coal trade with Canberra in 2020.
The Aussie was last steady at $0.6835, while the kiwi climbed 0.11 per cent to $0.6298, after gaining 0.7 per cent in the previous session.
NAB's Attrill said that the Aussie dollar has obviously benefitted from the coal story, and that most other commodity currencies are supported.
The Japanese yen climbed by 0.5 per cent to 131.97 per dollar on Thursday, a rebound from its 1.2 per cent overnight slide, as traders bet that the Bank of Japan may abandon its controversial yield curve control soon.