SINGAPORE – The dollar hugged tight ranges on Wednesday ahead of a slew of U.S. economic data that could set the tone for the Federal Reserve’s rate outlook, something traders consider more consequential for currencies than ongoing geopolitical tensions.
Markets have thus far largely brushed off deepening geopolitical fractures around the world, with stocks rallying and currencies and bonds little budged following the U.S. intervention in Venezuela and the capture of President Nicolas Maduro.
Also on traders’ radar, China on Tuesday banned exports of dual-use items to Japan that can be used for military purposes, marking Beijing’s latest move in reaction to an early November remark by Japanese Prime Minister Sanae Takaichi about Taiwan.
“I think there is still a lot of uncertainty as to whether the regime will change in Venezuela and what it will mean for the oil supply in Venezuela. So I think markets for now are taking a pretty optimistic view, and are more concerned about U.S. economic data,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“The fact that China implemented more export controls against Japan also didn’t really move FX markets much either.”
Currencies were largely subdued in early Asia trade, with the Australian dollar the main mover as it fell 0.3% to a session low of $0.6717 in the wake of inflation data which undershot expectations, though it soon clawed back those losses.
Sterling was flat at $1.3502, while the Japanese yen was a touch stronger at 156.63.
The euro edged 0.03% higher to $1.1692, having lost 0.3% in the previous session after data showed inflation slowed more than expected in some of the euro zone’s biggest economies last month.
Overall, currency traders were in a wait-and-see mode ahead of a batch of U.S. labour market data, with figures on private payrolls and job openings due later in the day, before Friday’s closely watched nonfarm payrolls report comes due.
Ahead of the outcome, the dollar index was little changed at 98.58, while the New Zealand dollar last bought $0.5784.
“The most impactful publication will be ADP’s monthly jobs report, as an uptick in unemployment is one of the significant risks in this new year, alongside the potential failure of heavy investments in AI to deliver blockbuster returns,” Jose Torres, senior economist at Interactive Brokers, said of Wednesday’s releases.
Investors have struggled to get an accurate read of the world’s largest economy following a record U.S. government shutdown last year which hampered the collection and release of key economic data.
However, they remain convinced that the Fed will cut rates at least two more times this year.
That has weighed on the dollar, though growing divisions within the Fed and U.S. President Donald Trump’s imminent pick for the next Fed Chair have further complicated the outlook for U.S. monetary policy.
(Reporting by Rae Wee Editing by Shri Navaratnam)
