Forex – Dollar slightly weaker in early Asia on U.S. debt, tax politics


© Reuters. Yen gains in Asia

Investing.com – The dollar traded slightly weaker against the yen in early Asia as talks to raise the U.S. debt ceiling drag on and investors worry about getting tax cuts through the U.S. Congress.

USD/JPY fell 0.04% to 109.19, while AUD/USD traded at 0.8008, up 0.07%.

Australia reports its trade balance for July with a surplus of A$875 million seen.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last quoted down 0.08% to 92.21.

Overnight, the dollar recovered from session lows against a basket of major currencies on Wednesday, as geopolitical tensions in the Korean peninsula eased while data showing U.S. services sector growth rebounded in August lifted sentiment.

The dollar pared some of its losses against safe-haven currencies like the yen and the Swiss franc, as data showed US services sector grew in August which lifted sentiment on the greenback amid ongoing geopolitical tensions.

The Institute for Supply Management’s index registered 55.3 in August. This was a reversal from a decline in July, when the index hit 53.9.

A reading above 50 for the index indicates expansion in the service sector, and a reading below 50 indicates contraction.
The positive services sector data comes amid continued geopolitical tensions after South Korean President Moon Jae-in warned that the crisis on the Korean Peninsula risks becoming “uncontrollable” in the wake of North Korea’s nuclear test on Sunday.

The dollar has come under pressure as expectations of a rate hike later this year continued to fade amid dovish comments from Fed officials earlier this week.

Minneapolis Federal Reserve Bank President Neel Kashkari said the Federal Reserve’s recent interest rate hikes may be slowing inflation and inflicting “real harm” on U.S. economic growth.

“Maybe our rate hikes are actually doing real harm to the economy,” said Kashkari.

Kashhkari comments came a few hours after Federal Reserve Governor Lael Brainard urged the U.S. central bank to delay raising interest rates until the trend of slowing inflation improved.

Meanwhile in Canada, a surprise interest rate increase fuelled a sharp move higher in the loonie, which limited gains in the greenback. The Bank of Canada raised its benchmark rate to 1% from 0.75%.

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