U. S. dollar has been falling for 4 months in a row
2023.01.31 09:46
U. S. dollar has been falling for 4 months in a row
By Ray Johnson
Budrigannews.com – On Tuesday, ahead of a slew of central bank decisions, the dollar gained a little bit, but it was still on track for its fourth monthly loss in a row.
The European Central Bank (ECB) and the Bank of England (BoE) will set interest rates on Thursday, followed by the U.S. Federal Reserve on Wednesday.
Overnight, currencies struggled to find their way, but the euro lost 0.27 percent to $1.082 against the dollar in early European trade.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, stated that “likely some profit-taking ahead of the key event risks just ahead” was the reason for this.
Additionally, analysts predicted that investors would rebalance their portfolios at the end of the month.
After a respite for the economy of the euro zone provided by falling energy prices, the euro remained roughly 1% higher for the month and was close to a peak of nine months.
On Tuesday, the, which compares the currency to major peers, was up 0.25 percent at 102.5.
However, it was approximately 0.9% lower overall for January. This meant that it was going to fall for the fourth month in a row, having dropped around 11% since reaching a 20-year high in late September.
Ben Laidler, a global markets strategist at trading platform eToro, stated, “These foundations of dollar strength continue to be undermined, whether it is the less bad global economic outlook or the Fed easing back.”
Markets had a busy week on Tuesday as data showed that the economy of the euro zone grew by 0.1% unexpectedly in the fourth quarter, beating predictions of a decrease of 1%. According to data released on Monday, Germany’s economy unexpectedly contracted in the fourth quarter of 2022.
On Wednesday, the Fed is expected to raise interest rates by 25 basis points (bps), the smallest increase since March 2022, to a range of 4.5 percent to 4.7 percent. This will be the major event of the week.
The pricing of derivatives markets suggests that the market anticipates additional tightening, but analysts disagree on how much.
Chris Weston, head of research at broker Pepperstone in Melbourne, stated, “In the less likely outcome that the Fed give the impression that they could pause after this week’s hike, then the U.S. dollar could easily sell off and risky assets rally.”
The ECB and BoE are expected to raise their main interest rates by 50 basis points on Thursday, according to investors.
Sterling was last seen at $1.232, down 0.28 percent, but on track to rise for the fourth month in a row.
With markets anticipating a change in Japanese monetary policy, the yen was up 0.05 percent at 130.42 per dollar, preparing for its third monthly gain.
Markets mostly ignored Chinese manufacturing data that showed a return to growth in January, which was slightly better than expected. Now, the focus is on the recovery that lies ahead.
The closed at $0.699, down 0.96 percent. Australian retail sales in December experienced their largest decline in more than two years, according to overnight data.
