Dollar recovers from 16 month low, kiwi poised for weekly losses

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Dollar recovers from 16 month low, kiwi poised for weekly losses

The euro recovered from 16 month low but set for weekly losses Yen steadies above 5 year trough Sterling, kiwi shine against strong dollar on hike bets by Tom Westbrook SYDNEY, Nov 19, Reuters -- The dollar had a second week of chunky gains against the euro as traders bet on interest rates rising faster and further north of the North Atlantic's western shore, while sterling and the kiwi have also firmed with rate hike bets. In emerging markets a growing currency crisis in Turkey has driven the lira to a new record low after the central bank faced political pressure to cut rates despite inflation running near 20%. The euro has been the big mover this week, but traders said it remains vulnerable as fundamentals and positioning swing to favour the dollar, as it has recovered to $1.1372 after slumping to $1.1263. The dollar index went up 0.5% this week, and touched a 16 month high, as the single currency lost 0.6% this week. It sat just shy of that at 95.531. Kit Juckes, a Societete Generale strategist, said that previous post-GFC occasions when the euro traded below $1.10 were accompanied by a big euro short position. If the question is '' Will the market get very short euros now, then I think the answer is that it will unless data improves dramatically. U.S retail sales beat expectations this week, after last week's inflation surprise. In Europe, COVID 19 is surging again, car sales fell for a fourth consecutive month and central bankers are vowing to hold rates low. Friday moves were small and the focus was on central bank speakers, with European Central Bank President Christine Lagarde at 0830 GMT, Bank of England economist Huw Pill at 1200 GMT and Federal Reserve officials Christopher Waller and Richard Clarida at 1545 GMT and 1715 GMT. The yen was headed for a weekly loss of 0.4%, but it has recovered since touching an almost five-year low of 114.97 a few days ago, at 114.27 per dollar. The heavily-shorted Australian dollar is poised for a third consecutive week of loss and has been under pressure due to a fall in oil prices over the past few days. It was last steady at $0.7277. The Bank of England has hiked rates in a month and has gained about 0.7% to $1.3499, a rise in inflation to a 10 year high. The kiwi has gone up 0.7% overnight and is steady for the week as traders start to wager on the RBNZ turning more hawkish and lifting rates by 50 basis points bps next week, or perhaps lifting its long-term rates trajectory. Swaps markets have priced a 40% chance of a 50 bps hike. The data pushed the bellwether two-year swap to a new high for the year, which in turn put the bid in behind the kiwi, said analysts at the ANZ Bank. Local markets could be set up for some real disappointment if we get a 25 bps hike for next week, as we expect, with 36 bps of hikes priced in for next week and 198 bps priced in over the next eight meetings. It was headed for its worst week since May, dropping 13%. It was last near a three-week low of $57,033.