Dollar slides on expectations of less hawkish Fed, euro at 1-month high

Shafaq News / The euro climbed back above parity against the dollar for the first time in a month on Wednesday after poor U.S. economic data reinforced speculation that the Federal Reserve will slow its interest rate hikes, sending the greenback tumbling.

The European common currency rose as high as$1.0048, the highest since Sept. 20, and was last up 0.5% at $1.100215.

Sterling rose 0.9% to $1.1574, its highest since Sept. 14, extending the previous day's 1.6% gain when markets took succour from Rishi Sunak becoming Britain's prime minister, and the dollar also fell against the Japanese yen , sliding 0.6% to 147.0.

"It's a continuation of the (dollar) sell-off that we've seen since the end of last week. Markets are anticipating a potential slowdown in the pace of Fed hiking," said Lee Hardman, a currency analyst at MUFG.

"We don't think that's going to happen at the next meeting in November, but certainly by December there's a higher probability they could step down the pace to 50 basis points rather than the 75 basis points we've seen recently."

The aggressive pace of Fed tightening has sent the dollar higher this year.

Fed officials have begun sounding out their desire to slow the pace of increases soon, according to a Wall Street Journal report on Friday that caused markets to reprice.

This was reinforced by Tuesday data showing that U.S. home prices sank in August as surging mortgage rates sapped demand, in the latest sign that Fed rate increases are already working to slow the world's biggest economy.

Traders and economists predict another 75 basis point increase next Wednesday, but there is a growing view that it will slow to half a point in December.

The benchmark 10-year U.S. Treasury yield continued its descent from last week's multi-year high of 4.338%, and was last down four basis points at 4.069%.

(Reuters)