Dollar strengthens on Fed minutes, Australian dollar gains solid employment data

SINGAPORE (Reuters) – The Dollar rallied against its key counterparts on Thursday after the US Federal Reserve's September meeting announced a few minutes before confirming its expectation that the central bank would likely continue to raise its rates. This year.

The minutes of the 25-26 September Fed meeting showed that all Fed decision-makers supported rising interest rates and that, in general terms, borrowing costs would continue to rise, although US President Donald Trump thinks the tightening has already been excessive.

Interest rate futures are now predicting a 83% chance that the Fed will raise rates in December, according to CME's FedWatch monitoring tool, which is on its fourth rise this year. Two more increases are expected next year.

The .DXY dollar index, which measures its value against six major peers, has traded at 95.65, up 0.08% on Thursday.

"The dollar is in the offer phase as it is followed after the publication of the FOMC minutes," said Ray Attrill, head of monetary strategy at NAB.

"Dollar bulls seem to think that the market is undervaluing what the Fed can do," added Attrill.

US 10-year benchmark US cash yields US10YT = The gross rate of return climbed to 3.21% on Thursday, due to the expected rise in key rates. The last time they exchanged below the psychologically important threshold of 3%, it was September 18th.

The Italian market is also formed in Rome, where the Italian government is preparing for a confrontation with Brussels following the insistence of Italy on achieving a budget deficit target of 2.4% GDP, higher than the previous target of 1.9%.

Italy's draft budget for next year, which increases social spending, reduces the retirement age and increases the deficit, could violate EU budget rules that force Rome to reduce its large debt public.

The explosion has raised investor concerns over the growing political tensions in the euro area between Brussels and the member states of the common currency.

The euro EUR = changed hands at 1.1479 USD Thursday, trading against the greenback, after losing 0.65% on Wednesday. The euro has lost 2.73% against the dollar over the last three weeks.

"In the current state of things, Italy should further soften the feelings of the single market before the first steps towards a compromise are in sight. Our target for the euro at the end of 2018 remains at 1.12, "said Philip Wee, foreign exchange strategist at DBS in a note.

The pound lost 0.12% against the dollar on Thursday at 1.3096 dollars, which weakened after the EU's chief negotiator for Brexit, Michel Barnier, said it needed more time to get an exit agreement for Britain.

The Canadian dollar changed hands at 1.3040, with the dollar gaining 0.2% against the Canadian dollar on Thursday. The greenback rose 1.6% against the Canadian dollar over the last twelve trading sessions.

The yen yen changed hands Thursday at 112.53 dollars, while the dollar weakened by 0.12% against the Japanese currency. The yen hit its six-day low, hitting a low of 112.72 on Thursday.

The Australian dollar changed hands at $ 0.7128 Thursday, gaining 0.3% against the greenback thanks to a high unemployment report.

The Australian dollar hit a two-year low of $ 0.7039 on October 5 and analysts are still expecting the currency to remain under pressure.

"The combination of a stronger US dollar and commodity price pressures could lead to a test of the lowest of the last two years at around US $ 0.7040 in future sessions," said Michael McCarthy, who is based in London. Sydney, chief market strategist at CMC Markets.

Elsewhere, in a highly anticipated paper by the markets, the US Treasury Department's semi-annual currency report released Wednesday did not name China or any other trading partner as a currency handler.

"The fact that they refrained from calling China a currency manipulator is a positive development, especially in terms of emerging market currencies," said Attrill.