NEW YORK (Reuters) - The dollar held steady against a basket of currencies on Wednesday as traders rolled back bets of an aggressive interest rate decrease next month after comments from Federal Reserve officials that such a move may not be warranted at this time.
Bitcoin rang up a stellar day, jumping over 16.26% to its highest level since January 2018.
The greenback and the euro strengthened against the yen after U.S. Treasury Secretary Steven Mnuchin was quoted by CNBC as saying the trade deal between the United States and China is “about 90%” complete. Mnuchin’s comments were later restated to show he was using the past tense to describe progress in the U.S.-China talks.
The pullback in the yen and Swiss franc was limited as traders remain jittery over prospects at the G20 summit this weekend in Osaka, Japan, where U.S. President Donald Trump and Chinese President Xi Jinping are due to have a meeting. Some bids for both perceived safe-haven currencies persisted amid tensions between Iran and the United States.
Traders have been speculating whether Trump and Xi could at least reach an agreement to restart talks at the summit in a bid to avert more tariffs between the two nations.
“No breakthroughs are expected. There is hope they will continue negotiating,” said Eric Viloria, currency strategist at Credit Agricole in New York. “That could be neutral for the dollar.”
Earlier Wednesday, Trump told Fox Business Network he would impose additional duties on Chinese imports if he does not clinch a deal with Xi.
In late U.S. trading, the dollar was up 0.57% at 107.790 yen, while the euro was 0.58% higher at 122.585 yen.
The greenback was little changed against the euro at $1.1372.
The dollar index edged up 0.09%, holding above a three-month low, in the wake of comments from two Federal Reserve officials, which cooled expectations the central bank would lower key lending rates by an aggressive half a percentage point at its next policy meeting on July 30-31.
On Tuesday, Fed Chairman Jerome Powell stressed the central bank’s independence from Trump, who is pushing for rate cuts. St. Louis Fed President James Bullard, considered one of the most dovish U.S. central bankers, surprised some investors by saying a 50 basis point cut in rates “would be overdone”.
The dollar fell last week after policy-makers opened the door to rate cuts in coming months.
Interest rates futures implied traders fully expect a rate cut from the Fed next month, but they now see a 24% chance of a 50 basis-point decrease, down from 30% late on Tuesday, according to CME Group’s FedWatch tool.
Bitcoin continued its red-hot streak, approaching $14,000 on the Luxembourg-based Bitstamp exchange late Wednesday. The world’s biggest and best-known virtual currency has been on a tear since Facebook rolled out its plan for its own digital currency, stoking bets for their usage to grow.
Graphic: Bets on bold first rate-cut from the Fed (tmsnrt.rs/2XTkkpn)
Graphic: Dollar index, CFTC positionings (tmsnrt.rs/2ZWCeZl)
Graphic: Bitcoin (tmsnrt.rs/2FxTa08)
Graphic: World FX rates in 2019 (tmsnrt.rs/2egbfVh)
Additional reporting by Saikat Chatterjee in LONDON; Editing by Susan Thomas and Chizu Nomiyama