Dollar updates annual lows
2023.01.24 08:07
Dollar updates annual lows
By Ray Johnson
Budrigannews.com – On Tuesday, traders weighed the divergent economic outlooks for the United States and Europe as the dollar remained close to nine-month lows against the euro and surrendered recent gains against the yen.
Analysts stated that Tuesday’s Euro zone data supported the view that the economy is reasonably surviving a winter of intense price pressures.
The, which compares the performance of the US currency against a basket of six major currencies, gained 0.1% to 102.07, narrowly avoiding the 7-1/2-month lows reached last week.
According to National Australia Bank (OTC:) head of foreign-exchange strategy Ray Attrill, “The U.S. is no longer the cleanest shirt in the global economic laundry.” who anticipates that the euro will rise to $1.10 and the dollar index will fall to 100 by the end of March?
“That’s essential to our bearish U.S. dollar view, that the United States will not be the global leader in growth,” the statement reads.
Before the Federal Reserve begins cutting interest rates later this year, traders in the money market anticipate only two more quarter-point rate increases to a peak of approximately 5% by June. The Federal Reserve has insisted that further increases of 75 basis points are still planned.
In contrast, a flurry of European Central Bank officials signaling that tackling inflation will necessitate more rate rises than the market currently anticipates has helped the euro gain nearly 0.8 percent in the past week.
Business activity in the Eurozone unexpectedly returned to modest growth in January, according to surveys released on Tuesday. Service sector activity in Germany expanded for the first time since June, despite persistent price pressures.
Michael Brown, a market strategist for TraderX, stated, “There is probably enough in there to cement another 50 basis points in increases from the ECB.”
After reaching a session high of $1.0898 on Monday, the euro was flat against the dollar at $1.0868, close to its highest level since April.
Meanwhile, ECB President Christine Lagarde reiterated on Monday that the central bank will continue to rapidly raise interest rates to control inflation, which is still higher than its target rate of 2%.
The dollar fell 0.4% to 130.19 yen in other markets, ending a two-day rally.
The dollar dropped to as low as 127.215 yen last week, its lowest level since May, ahead of a Bank of Japan policy review, when investors expect the central bank to announce whether or not it will end its stimulus program. However, the BOJ did not change its policy, which gave the dollar some breathing room.
However, analysts believe that the BOJ will alter its yield curve control (YCC) mechanism, which keeps 10-year yields close to zero and keeps short-term rates at -0.1%, sooner rather than later.
According to NAB’s Attrill, who predicts that the dollar-yen will fall to 125 by the end of March, “clearly, the market regards the YCC policy as well past its use-by date, and it’s only a matter of time – and probably months rather than quarters – until the BOJ sounds the death knell on it.”
“The time of yen weakness is quickly passing us by.”
After a survey revealed that British private-sector economic activity fell at its fastest rate in two years in January, sterling was the major currency that performed the worst against the dollar, falling 0.52 percent on the day to $1.2312.
Simon Harvey, head of FX Analysis at Monex Europe, stated, “Looking forward, we expect sterling to start underperforming neighbouring European currencies as economic data highlights widening growth differentials.”
