Dollar in Range Before Minutes as Mester Says Fed Will Be Nimble

(Bloomberg) -- The dollar traded in a narrow range as investors awaited the release of Federal Reserve minutes to gauge when policy makers will raise interest rates again.

The U.S. currency has stayed between its 50- and 100-day moving averages against the yen this month after surging late last year on bets President Donald Trump’s reflationary policies would spur the Fed to step up rate increases. Policy makers don’t want to surprise markets and have to be “nimble” to adjust their outlook amid global and domestic risks, Cleveland Fed President Loretta Mester said in Singapore.

“The fact the dollar is barely above the moving average covering the first period of Trump in office shows while it is underpinned by expectations for his fiscal policies, his other moves, such as on immigration, are capping it,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. “Markets have pretty much priced in hawkish Fed speak and now need details of actual policy from Trump to push the dollar higher.”

The market is also waiting for more U.S. economic data including February’s payrolls data, Tokyo-based Suzuki said. Investors are expecting the Fed to raise rates twice this year, according to futures data compiled by Bloomberg.

• USD/JPY falls 0.2% to 113.48, 50-DMA at 114.94, 100-DMA at 111.55

  • Minutes from Fed’s Jan. 31-Feb. 1 meeting, at which officials kept their target rate in a range of 0.5 percent to 0.75 percent, will be released at 2 p.m. in Washington

  • “We certainly never want to surprise the markets,” Mester said in an interview from Singapore with Bloomberg Television’s Haidi Lun. NOTE: Mester is an FOMC policy voter in 2018, but not in 2017

  • Odds of rate increase at Fed’s March meeting are 38%, up from 31% at end of January

  • Fed may want markets to price in more than two rate hikes, so the minutes could be hawkish and send USD/JPY above 114, says Koichi Takamatsu, head of G-10 FX trading for Japan at Nomura Securities

• AUD/USD rises 0.2% to 0.7687; gains partly driven by offshore demand related to announcement of 2028 bond tender, according to an Asia-based FX trader

  • Australia sells A$11b of bonds in biggest-ever sale; click here for story

--With assistance from Michael G Wilson

To contact the reporter on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net.

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Nicholas Reynolds, Shikhar Balwani

©2017 Bloomberg L.P.