News: FOREX-Dollar gains against euro as Fed, Middle East in focus

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    (Updated at 1000 EDT)

    The dollar rose against the euro on Wednesday before several Federal Reserve officials were due to speak and as investors watched the war between Hamas and Israel for signs of escalation.

    The currency has benefited from expectations the U.S. central bank will hold rates higher for longer as it battles to bring inflation closer to its 2% annual target.

    “Largely I think we’re still basing currency movements on interest rates,” and the Fed’s “very determined attempt to keep interest rates high to fight inflation,” said Joseph Trevisani, senior analyst at FXStreet.com in New York.

    Since mid-July, the benchmark 10-year Treasury yield US10YT=RR has climbed about 100 basis points and the dollar index has risen around 7%.

    Fed funds futures traders are pricing in a 40% chance that the Fed could hike rates again by year-end, but only 11% odds of an increase next month, according to the CME Group's FedWatch Tool.

    Minneapolis Fed President Neel Kashkari on Tuesday said it has taken much longer than expected for inflation to come down, and it is "still too high."

    The Fed should extend its pause on interest rate increases because of growing evidence that higher borrowing costs will slow the economy, Philadelphia Fed president Patrick Harker said.

    Other regional Fed presidents are due to give comments on Wednesday, before Fed Chaiman Jerome Powell is also scheduled to speak on Thursday. FED/DIARY

    Fed officials will enter into a blackout period on Oct. 21 before the central bank's Oct. 31–Nov. 1 meeting.

    The dollar index =USD was last up 0.15% on the day at 106.37. It is holding below the 107.34 level reached on Oct. 3, the highest since November 2022.

    The euro EUR=EBS dipped 0.23% to $1.0552. It is up from $1.0448 on Oct. 3, the lowest since December 2022.

    The dollar is also benefiting from safe haven demand on concerns over the conflict in the Middle East.

    U.S. President Joe Biden arrived in Israel on Wednesday pledging solidarity in its war against Hamas and saying that a blast that killed huge numbers of Palestinians at a Gaza hospital appeared to have been caused not by Israel but by its foes.

    The Chinese yuan briefly jumped after official data showed China's economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside.

    The yuan CNY=CFXS hit a one-week high of 7.2905 per dollar, though it then retreated to 7.316. The China-sensitive Australian AUD=D3 and New Zealand dollars NZD=D3 both jumped before unwinding their gains.

    Sterling fell after a brief pop as British consumer price inflation (CPI) unexpectedly held at 6.7% in September, remaining the highest of any major advanced economy and keeping alive the possibility of another rise in interest rates.

    The pound GBP=D3 was last down 0.13% at $1.2168. The yen JPY=EBS was last up slightly at 149.70 to the dollar. The Bank of Japan on Wednesday unexpectedly announced $2 billion in bond-buying to keep downward pressure on yields.

    The 150 yen mark has become a psychological level after past government interventions to prop up the currency occurred around that point. Earlier in October the yen rallied sharply after falling past 150, although it later fell back and early indications suggest Japan did not intervene.

    	======================================================== 
    	Currency bid prices at 10:00AM (1400 GMT) 
    
     Description	  RIC		 Last		   U.S. Close  Pct Change	  YTD Pct	   High Bid	Low Bid 
    											  Previous					Change					
    											  Session											   
     Dollar index	  =USD	   106.3700	   106.2200	+0.15%		  2.783%		+106.4000   +106.0100 
     Euro/Dollar	   EUR=EBS	$1.0552		$1.0576	 -0.23%		  -1.52%		+$1.0594	+$1.0549 
     Dollar/Yen		JPY=EBS	149.7000	   149.8000	-0.07%		  +14.18%	   +149.8300   +149.4900 
     Euro/Yen		  EURJPY=	157.96		 158.44	  -0.30%		  +12.59%	   +158.5400   +157.9300 
     Dollar/Swiss	  CHF=EBS	0.8968		 0.9005	  -0.38%		  -2.98%		+0.9009	 +0.8963 
     Sterling/Dollar   GBP=D3	 $1.2168		$1.2184	 -0.13%		  +0.62%		+$1.2211	+$1.2160 
     Dollar/Canadian   CAD=D3	 1.3670		 1.3648	  +0.16%		  +0.90%		+1.3672	 +1.3617 
     Aussie/Dollar	 AUD=D3	 $0.6356		$0.6366	 -0.15%		  -6.75%		+$0.6393	+$0.6352 
     Euro/Swiss		EURCHF=	0.9462		 0.9519	  -0.60%		  -4.38%		+0.9523	 +0.9461 
     Euro/Sterling	 EURGBP=	0.8670		 0.8681	  -0.13%		  -1.97%		+0.8688	 +0.8661 
     NZ				NZD=D3	 $0.5878		$0.5897	 -0.30%		  -7.41%		+$0.5919	+$0.5879 
     Dollar/Dollar																					  
    
     Dollar/Norway	 NOK=D3	 11.0070		10.9600	 +0.41%		  +12.14%	   +11.0170	+10.9380 
     Euro/Norway	   EURNOK=	11.6173		11.5781	 +0.34%		  +10.71%	   +11.6286	+11.5650 
     Dollar/Sweden	 SEK=	   10.9844		10.9044	 +0.43%		  +5.54%		+10.9951	+10.8991 
     Euro/Sweden	   EURSEK=	11.5881		11.5385	 +0.43%		  +3.93%		+11.6015	+11.5393                    
 
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