SYDNEY – The dollar, which suffered its biggest weekly drop of the year, is taking a breather as traders await economic data and policy decisions before further selling.
Important data, including Chinese growth data and loan-rate settings, as well as U.S. retail sales and British inflation later in the week, will provide further direction for the currency. In addition, several central bank meetings are scheduled for next week.
After jumping 2.4 percent last week to a 16-month high, the euro is holding just below that peak at $1.1228. The yen, which also gained 2.4 percent last week, is holding steady at 138.69 per dollar.
The dollar’s decline began with yen buying as investors unwound yen-funded positions in emerging markets. It accelerated after weaker-than-expected U.S. inflation data, increasing expectations that U.S. interest rates will soon reach their peak.
While the Federal Reserve and European Central Bank are expected to raise interest rates next week, market pricing suggests that the Fed may pause after that and potentially cut rates next year, while the ECB may have another rate hike ahead.
“The FX market is front running possible normalization of Fed policy in 2024,” said Chris Weston, head of research at broker Pepperstone in Melbourne. “The question then is whether the dollar sell-off has gone too far and we are at risk of mean reversion early this week.”
The U.S. dollar index, which fell 2.2 percent last week, is steady at 99.956 early in the Asia session on Monday.
The Australian dollar has retreated from last week’s high of $0.6895 and is trading at $0.6830 on Monday. Similarly, the New Zealand dollar is below Friday’s five-month peak of $0.6412 at $0.6364.
The Antipodean currencies could face pressure if Chinese data disappoints. Meanwhile, the sharp gains in the yen have slowed as traders assess the likelihood of any changes in the ultra-dovish Bank of Japan’s policy meeting next week.
The Swedish and Norwegian crowns gained more than 5 percent against the dollar last week, while sterling remained just below last week’s 15-month peak at $1.3089.
“The dollar may remain on the backfoot as the market re-positions itself for a less hawkish Fed,” said Jane Foley, head of FX strategy at Rabobank. “That said, the outlook for the latter few months of the year is less clear cut. By then, other major central banks including the ECB will also likely have reached their peak policy rates… interest rate dynamics may therefore swing back in favor of the dollar.”
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
Denial of responsibility! Samachar Central is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
