NEW YORK, Oct 5 (Reuters) – The dollar rebounded across the board on Wednesday as recent risk sentiment reversed and U.S. stocks fell, with the euro and pound each losing more than 1% .
The euro fell 1.4% to $0.9852 after rising 1.7% on Tuesday.
The pound fell 1.8% to $1.1268, after rising for six straight sessions. Its fall was extended slightly as British Prime Minister Liz Truss pledged to cut debt as a percentage of national income, just over a week after the government’s plans to cut taxes and raise borrowing scared the markets.
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Adding to the pressure on the pound, data showed that Britain’s private sector economy last month suffered the biggest contraction in activity since the COVID-19 lockdown early last year.
Recent gains in most major currencies against the dollar have been underpinned by hopes from investors and traders that the US Federal Reserve will raise interest rates less than expected.
“You had general risk where the euro, the pound were trading really well and the stock market was gaining. I kind of think it’s just (investors) exploring a trading range,” Marc said. Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Ultimately, the rebound in risk assets is not happening because of a change in Fed sentiment.”
From there, investors should focus on Friday’s U.S. jobs data, he said, which will be watched for clues about the Fed’s possible monetary policy path.
US Fed Governor Philip Jefferson reiterated overnight that inflation was the main target of policymakers and that growth would suffer from efforts to bring it down.
San Francisco Fed President Mary Daly took a softer line and said the impact of the dollar, which is soaring this year, on other currencies and economies was concerning.
A fifth consecutive 50 basis point rate hike by the Reserve Bank of New Zealand (RBNZ) on Wednesday reminded investors that inflation remains the top concern for central banks.
The New Zealand dollar was last down 1% at $0.5676, after jumping 1.3% earlier in the session. The Aussie dollar was also down 1% at $0.6436.
In other currencies, the dollar appreciated by 0.4% against the Japanese yen.
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Additional reporting by Harry Robertson in London. Additional reporting by Tom Westbrook in Sydney; Editing by Bernadette Baum and Jonathan Oatis
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