The dollar hovered around recent lows on Friday and was set to notch a modest weekly drop as traders’ concerns at taper talk in Federal Reserve minutes faded, though a pullback in commodity prices and nerves about virus outbreaks kept losses in check.
The dollar has given back a bounce it made after a mention of possible future tapering discussions, in minutes from the Fed’s April meeting, prompted fears of early rate rises.
Investors now figure that any action remains a long way away and that the path might again be clear for a resumption of April’s downtrend as the U.S. trade and account deficits weigh.
Against the euro the dollar was parked at $1.2230, not far above the four-month low $1.2245 it hit earlier in the week and close to testing major support around $1.2345. The dollar index was held below 90 and was last at 89.777.
The index, which measures the greenback against six major currencies, is down about 0.6% for the week so far. Against the Japanese yen the dollar held at 108.74, for a weekly loss of roughly 0.5%.
“It has been just over 24 hours since markets got spooked by the prospect of the U.S. Fed tapering its asset purchases, but having proverbially slept on it, the mood seems less sour,” ANZ analysts said in a note. “Which seems reasonable – it’s not like the Fed is on the brink of wanting to actually act.”
SHADOW OF A DOUBT
Lingering doubts about the Fed as well as worry about new COVID-19 outbreaks and curbs to contain them in Malaysia, Thailand, Taiwan, Vietnam and Singapore held most of the majors steady in Asia.
Pullbacks in commodity prices after measures to curb speculation in China weighed gently on the export-exposed Australian and New Zealand dollars. Each fell about 0.2%.
“European re-opening is a theme playing out in the background, but to fear or not to fear Fed taper is still an issue,” said Bank of Singapore currency analyst Moh Siong Sim.
Sterling, which is heading for a third consecutive weekly gain and has climbed 2.6% during May so far, was pinned just short of multi-year highs as traders await retail sales and Purchasing Managers’ Index data due later on Friday.
April figures may be depressed by lockdowns, but the hope is that Britain’s reopening this week is going to lay a solid foundation for recovery in a population where just shy of three-quarters of adults have had their first inoculation shots.
Sterling last traded steady at $1.4185.
Left behind in all the recent focus on inflation, tapering and future hikes has been the Japanese yen. It is near its weakest in three years at 133.02 per euro and is poised for a fifth consecutive weekly loss against the common currency .
Against the dollar, the yen has slid 5% for the year to date and is the worst performing G10 currency. It has fared even worse on some crosses, shedding nearly 10% on the Canadian dollar and nearly 9% on the pound.
U.S Dollar Jumps to Three Weeks High on Better Than Expected Retail Sales
The United States Dollar rose to a three-week high after data from the Commerce Department showed that the U.S retail sales rebounded in the month of August despite falling consumer confidence.
The US Dollar Index rose to 93.40 on Monday to extend Friday breakout above the 93.00 key resistance level.
U.S retail sales jumped to its highest in five months in the month of August to beat 0.8 percent decline predicted by experts. Retail sales grew by 0.7 percent in August to increase the odds of the US Federal Reserve announcing tapering during next week’s Federal Open Market Committee (FOMC) meeting.
“U.S. consumption is not slowing as quickly as it appeared a month ago despite the fading stimulus, and the Delta variant did not much affect the industries feeding into retail sales,” said Chris Low, chief economist at FHN Financial in New York. “The economy continued to hum in August.”
Against the Japanese Yen, the U.S dollar strengthened to 109.48 from 109.91 attained on Friday on broad-based selloff during London trading session, while heavy selloff plunged British pound against the U.S dollar 1.36610 before reboundling slightly to 1.36946.
The Euro dropped from 1.17883 recorded on Friday to 1.16995 on Monday during London trading session.
Dollar Drops to One Week Low on Monday After U.S Consumer Sentiment Plunges to Lowest in 10 Years
The United States Dollar declined to a week-low against most currencies on Monday after dropping the most in seven weeks on Friday after a report showed U.S consumer sentiment dropped to the lowest since 2011 amid rising COVID-19 infections.
The dollar index, which tracks the greenback against six counterparts, changed slightly at 92.528, still maintaining a 0.50 percent decline posted at the end of last week.
However, the U.S Dollar dipped to 109.455 against the Japanese yen on Monday, its lowest since August 5, 2021. Against the euro common currency, the dollar was largely flat at $1.17960, near a week low of $1.18045 it closed on Friday.
“Does the survey signal an imminent turn in the U.S. economy? We doubt it given vaccine efficacy remains high and the hit to sentiment likely means more people will get vaccinated,” Tapas Strickland, an analyst at National Australia Bank, wrote in a client note. “Instead, the Delta surge in the U.S. is more a case of delay rather than derail as far as the recovery is concerned.”
Against the Nigerian Naira, the U.S Dollar traded exchanged at N515 on Monday at the parallel market popularly known as the black market. At the bureau de change section, the U.S. dollar was sold at N513 and N410.11 by the Central Bank of Nigeria.
Dollar Firm as Traders Brace for U.S. Inflation Data
The U.S. dollar held near multi-month highs on Friday as investors warily awaited U.S. inflation data, while the pound nursed modest losses after Bank of England (BoE) policymakers leaned away from flagging rate rises.
Early Asia trade was steady, with the euro pinned below its 200-day moving average at $1.1930 and the yen just short of a 15-month low at 110.955 per dollar.
The dollar vaulted to its highest levels since March against the euro last week – and to its highest since March 2020 on the yen – after the U.S. Federal Reserve surprised markets by projecting interest rate rises sooner than expected in 2023.
Subsequent rhetoric from Fed chair Jerome Powell seems to have calmed nerves in bond and stock markets about hikes any time soon, but the dollar has held its gains and traders are wary of further rises if inflation is hotter than forecast.
Economists polled by Reuters expect core personal consumption expenditures index to post year-on-year gains of 3.4%, a rise even faster than the nearly three-decade high pace of 3.1% recorded last month. The data is due at 1230 GMT.
“The dollar can jump if inflation surprises to the upside,” said Joe Capurso, head of international economics at the Commonwealth Bank of Australia in Sydney. “Upside inflation surprises have been the trend in the U.S. recently,” he said.
The stronger dollar has kept other majors in check through the week, even against currencies where rate rises are likely to land sooner than in the United States.
The New Zealand dollar has crept back above its 200-day moving average to $0.7063, but it remains well shy of February highs above 74 cents. In Australia, despite booming terms of trade, the Aussie held at $0.7584.
“A more balanced dollar outlook prevails after the Fed’s decisive policy shift,” Westpac strategist Sean Callow said.
“The Australian dollar’s strong support from commodity prices produces fair value estimates in the mid-0.80s,” he said.
“Yet recent price action has been in the mid-0.70s. With risk appetite looking resilient, any narrowing in this gap probably depends on how far the (Fed)-inspired U.S. dollar recovery can extend.”
The U.S. dollar index was steady at 91.833, off a week-ago high of 92.408 but clear of troughs below 90 that it had plumbed in May.
Sterling had started to move away from its post-Fed lows, but was the weakest G10 currency overnight and fell 0.3% after the BoE failed to provide any hint it was in a hurry to hike rates and warned against “premature tightening”.
“Some in the market obviously positioned for a less dovish or a hawkish tilt,” said Tapas Strickland, director of economics and markets at National Australia Bank.
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