Dollar gives up some gains after Fed boost; Aussie falters

The dollar index, which rose after the Fed’s surprise hawkish tilt last week, gave up some of its gains on Monday, while the Australian currency stumbled on lower prices of the country’s top export, iron ore.

The dollar index, which tracks the greenback against six major currencies, slipped to 92.286 from a high of 92.405 reached on Friday, a level not seen since April 13.

It jumped 1.9% last week — the most rise since March 2020 — as the U.S. Federal Reserve signaled a sooner-than-expected end to its ultra-easy monetary policy, triggering a collapse in U.S. shares and prompting analysts to revise their forecasts for stock and currency performance.

The Fed’s policy stance has become a tailwind for the dollar, accounting for a challenging backdrop for risk assets, Westpac analysts said.

While the index has the scope to test highs reached in March after its recent impulsive gains, “there’s not enough juice for a sustained medium-term breakout beyond that”, they added.

Analysts at Goldman Sachs agreed the dollar’s gains may not be sustained, noting other central banks will need to consider policy normalization too as their economies recover from the depressed levels brought on by the pandemic.

Benchmark 10-year U.S. Treasury yields fell to the lowest since early March at 1.4110% during Asian trading, while those on 30-year bonds slid as low as 1.9990% for the first time in more than four months.

The yield curve, or the spread between two- and 30-year yields, was the flattest since early February.

As the Fed’s hawkish stance dulled investor risk appetite, the safe-haven Japanese yen rose to a one-week high against the dollar. It was last up 0.3% at 109.80 per dollar.

In other currencies, the Aussie fell to $0.7474, a level not seen since Dec. 21, 2020, driven by a 5% drop in iron ore prices as a seasonal slowdown in construction activity in top steel producer and consumer China hit sentiment.

The euro was barely changed at $1.1859, having hit a 2-1/2-month low of $1.1847 on Friday. The British pound hit a two-month low of $1.3790 on Monday.

In cryptocurrencies, bitcoin fell 4% to $34,016, while ether changed hands at $2,077.58.

Dollar hits two-month highs on Fed’s hawkish surprise; kiwi climbs after GDP

The dollar rose to its highest level in almost two months versus major peers on Thursday after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy.

The dollar index, which tracks the currency against six rivals, ticked up to 91.459 in Asia, building on its nearly 1% surge overnight, the biggest gain since March of last year.

Only New Zealand’s kiwi made any meaningful headway against the dollar among major currencies on Thursday, climbing 0.4% after data showed New Zealand’s economy grew much faster than expected in the first quarter. The kiwi had tumbled more than 1% on Wednesday.

A majority of 11 Fed officials penciled in at least two quarter-point interest rate increases for 2023, even as officials in their statement pledged to keep policy supportive for now to encourage an ongoing jobs recovery.

The projections showed the outlook for inflation jumping this year, though the price increases were still described as “transitory.” Overall economic growth is expected to hit 7%.

“The Fed’s super hawkish pivot should reinforce the lows and offer further near-term USD support,” TD Securities analysts wrote in a research note.

“A double-whammy of higher rates and wobbly risk sentiment would result in positioning squeeze and the start of a new narrative,” possibly resulting in “a 2% broad USD rally through the summer months,” the note said.

The benchmark 10-year Treasury yield was at 1.5890% in Asia, after rallying to as high as 1.5940% from as low as 1.4820% on Wednesday.

The dollar climbed to an almost two-month high of $1.1984 per euro on Thursday, extending its gain of about 1% from the previous session.

It strengthened to as high as 110.825 yen, a level not seen since April 1, adding to a 0.6% rally overnight.

The Australian dollar dipped to $0.75975, the lowest since April 13, after tumbling 1% on Wednesday.

Sterling slipped to the lowest since May 7 at $1.39745, and the Canadian dollar hit the weakest since May 5 at C$1.2292.

Cryptocurrencies were also hurt by the dollar’s strength, with bitcoin hovering at $38,624 following a 4.5% slide Wednesday, and ether at $2,393 after a 7% selloff.

NCDEX Chana likely to trade between 4988-5224 levels

Technically Chana market is under long liquidation as market has witnessed drop in open interest by 0.83% to settled at 139750 while prices down 76 rupees.

Now NCDEX Chana is getting support at 5032 and below same could see a test of 4988 levels, and resistance is now likely to be seen at 5150, a move above could see prices testing 5224.

Chana yesterday settled down by 1.48% at 5075 on profit booking ahead of sowing report which can report higher sowing under Pulses area compare with last year.

However there is a strong possibility of shortage in pulses production, especially due to uncertainty over sowing this crop year due to the pandemic.

The country is most likely to face scarcity of pulses this year including masoor, chana and other pulses.

There could be a shortage of around 10 lakh tonne in the production of tur this year. As the apex body for the trade, IPGA is bringing it to the notice of the government well in advance to augment the supply side.

However, as per trade estimates, the production for tur has been around 2.90 million tonne, urad approximately 2.06 million tonne, moong around 2 million tonne, Chana around 9 million tonne and masoor around 0.95 million tonne.

India’s supply of Kabuli chickpea is expected to plunge 32 percent to 396,000 tonnes due to low carryout and very poor production prospects for all of India’s rabi (winter) season crops. Exports will fall to an estimated 50,000 tonnes, down from 115,000 tonnes each of the previous two years.

The situation is so dire that India is expected to import 50,000 tonnes from Canada, Argentina and Turkey. In Delhi spot market, chana gained by 22.7 Rupees to end at 5071.65 Rupees per 100 kgs.

Trading Ideas:
–Chana trading range for the day is 4988-5224.
–Chana dropped on profit booking ahead of sowing report which can report higher sowing under Pulses area compare with last year.
–The country is most likely to face scarcity of pulses this year including masoor, chana and other pulses.
–India’s supply of Kabuli chickpea is expected to plunge 32 percent to 396,000 tonnes due to low carryout and very poor production prospects
–In Delhi spot market, chana gained by 22.7 Rupees to end at 5071.65 Rupees per 100 kgs.

Dollar holds near one-month high; focus on Fed’s inflation take

The dollar held near a one-month high against a basket of currencies on Wednesday as investors tried to ascertain if the Federal Reserve might alter the language on its stimulus following a recent jump in U.S. inflation.

The dollar index stood at 90.528, having hit a one-month high of 90.677 on Tuesday despite mixed U.S. economic data.

U.S. retail sales dropped more than expected in May but sales in April were revised sharply up and are way above their pre-pandemic level.

With spending rotating back to services from goods as vaccinations allow Americans to travel and engage in other activities, the data cemented the perception of a strong recovery in the economy.

Separate data showed wholesale price inflation accelerated to 6.6%, the largest gain since November 2010.

The Federal Reserve is widely expected to acknowledge the first conversations among its policymakers about when and how fast to pare back the massive bond-buying program launched in 2020 when it concludes a policy meeting later in the day.

Yet most investors think the Fed will refrain from any hints of starting tapering its stimulus in the near future.

“The Fed has said they’re going to be reactionary to the data, ….and they’ve said they want to see extended inflationary conditions before they make any commitment to tapering or hikes,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

Wakabayashi said the dollar should rally if the Fed drops any hint that tapering will be brought forward or rate hikes are going to be looked at sooner, but added, “I think they’ll stick to the same tagline, and it will probably end up being a non-event.”

Some market players also noted the dollar could rise by default as other major currencies appear to be losing momentum.

“We have to note that the U.S. dollar is strengthening now even as U.S. debt yield has dropped below 1.5%,” said Makoto Noji, chief FX strategist at SMBC Nikko Securities.

“Today’s currency market suggests there is strong potential pressure to lift the dollar, should there be some sort of surprises from the Fed.”

The euro stood at $1.2126, little changed on the day but struggling to recover from its fall last week after the European Central Bank pledged to keep stimulus steady over the summer.

The yen was flat at 110.08 yen per dollar, near its two-month low of 110.325 touched earlier this month, with the Bank of Japan expected to extend some of its pandemic relief measures this week.

The British pound, a strong performer so far this year, hit a one-month low of $1.4035 on Tuesday despite stronger-than-expected employment data. It last stood at $1.4085.

The number of employees on British company payrolls surged by a record amount in May while pay growth marked its biggest rise since 2007 in April although statisticians warned that this was distorted by comparisons with depressed wages a year ago and greater job losses among low-paid staff.

While UK job recovery looks set to continue as the economy reopens, the rapid spread of the highly contagious Delta variant of the novel coronavirus, which forced Prime Minister Boris Johnson to delay his plans to lift lockdown, is seen as a risk.

The Australian dollar lacked traction after the country’s central bank signaled on Tuesday its willingness to extend its bond purchase program next month.

The currency changed hands at $0.7685, not far from a seven-week low of $0.7646 touched earlier this month.

In crypto markets, bitcoin traded at $40,305, having hit a near one-month high of $41,341 on Tuesday, aided by the promise of fresh investment from major backer MicroStrategy and an upbeat tweet from Tesla boss Elon Musk.

Ether had less momentum, at $2,561.

Dollar hovers near one-month high with market frozen before Fed test

The dollar hovered below a one-month high compared with major peers on Tuesday ahead of a much-anticipated Federal Reserve meeting that could signal a change in the outlook for U.S. monetary policy.

The U.S. currency has been buoyed as traders closed short positions before the Fed’s two-day policy-setting confab, which kicks off on Tuesday.

The dollar index, which measures the greenback against a basket of six currencies, was flat early in Asia at 90.517. It has pushed briefly above 90.60 in each of the last two sessions, and 90.63 would be the strongest level since May 14.

Traders will be watching carefully for clues on when policymakers will start tapering dollar-depreciating stimulus.

So far Fed officials, led by Chair Jerome Powell, have stressed that rising inflationary pressures are transitory and ultra-easy monetary settings will stay in place for some time to come, although recent economic data has raised concerns that price pressure after the post-COVID-19 economic reopening could force an earlier stimulus withdrawal.

“While Powell will tread carefully, I expect that the Fed is warming to a more open discussion about tapering, to be formally announced in the September meeting,” Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a note to clients.

“Any view that cements a formal announcement in September should be modestly USD bullish, but the risks are symmetrical as Powell will be keen to not hurt financial conditions,” he wrote.

Nearly 60% of economists in a Reuters poll expect a tapering announcement in the next quarter, despite a patchy recovery in the job market.

Currency markets settled in tight ranges with implied volatility plumbing multi-month lows after last week’s strong inflation readings and a dovish European Central Bank meeting failed to dislodge currencies from recent trading levels.

The Deutsche Bank FX Volatility Index plunged to 5.6 on Friday, its lowest in nearly 16 months, and remained just above that level this week.

The euro was little changed at $1.21185 on Tuesday, near an almost one-month low at $1.20930 reached on Friday.

The yen was at 110.075 per dollar, almost flat from Monday, after a more than 0.3% slide in each of the past two sessions.

In cryptocurrencies, bitcoin traded above $41,000 for the first time in more than two weeks on Monday, and was last around $40,495 after rallying from below $35,000 on Sunday after Tesla Inc boss Elon Musk tweeted that the electric carmarker would resume allowing bitcoin transactions when miners who verify transactions use more renewable energy.

Ether also got a small lift in sympathy with its bigger rival, but remained well within recent ranges at $2,605.54 on Tuesday.

Dollar marooned as investors shrug off inflation spike

After a week of anxious waiting, markets got the high U.S. inflation number they dreaded, then shrugged it off and moved on — leaving the U.S. dollar under pressure and most majors stuck in ranges.

Early in the Asia session the greenback nursed small losses, as traders figured there were enough one-offs in last month’s 0.6% rise in consumer prices to support the Federal Reserve’s insistence that inflation was likely to be transitory.

The dollar bought 109.44 yen and was headed for a small weekly loss. It was also on track for modest weekly losses on the Aussie dollar and British pound, last trading at $0.7752 per Aussie and $1.41825 per pound.

A dovish commitment from the European Central Bank to stick with its elevated tempo of bond buying held the euro in check at $1.2189.

“What we’re seeing is a market that believes in the Fed,” said Chris Weston, head of research at broker Pepperstone in Melbourne, as investors temper worries that the strong recovery in the United States prompts early rate hikes.

“We’re going to get tapering,” he said. “But it’s going to get done a such a snail’s pace.”

The data overnight showed U.S. consumer prices up 5% year-on-year, the sharpest rise in more than a dozen years and core inflation surging 0.7% in a month.

But hefty contributions from short-term rises in airline ticket prices and used cars helped convince traders it was not going to drive interest rates higher any time soon.

“It basically fit the Fed script, that we’d get a burst but it’s going to be temporary,” said Westpac currency analyst Imre Speizer.

“This report is consistent with that, it doesn’t argue against it. I think the market needed something that argued against it to push the U.S. dollar higher.”

The U.S. dollar index fell slightly after the inflation figures were published and last sat at 89.974, down very slightly for the week.

Benchmark 10-year U.S. Treasuries actually rallied to a three-month high in the wake of CPI, as short sellers quit bets on rising yields.

The 10-year yield was last at 1.4434% after dipping to a three-month low of 1.4320% earlier Friday. It was as high as 1.6350% a week earlier.

Focus now turns to the Fed’s meeting next week, although traders now say that there may not be much of a shift in rhetoric which has played down the need to taper stimulus.

A plan for reducing bond buying is expected to be announced in August or September a Reuters poll of economists found, but it isn’t forecast to begin until next year.

The South Korean won firmed 0.2% to 1,110.08 per dollar after the central bank governor hinted at normalizing policy, in an advance copy of a speech to be delivered later on Friday.

Indonesia’s rupiah gained about 0.4% to 14,187 per dollar as lower U.S. Treasury yields boosted the attraction of Indonesian bonds.

Cryptocurrencies looked to close out the week on a stronger footing, with bitcoin seemingly well supported above $35,000 despite more talk of global regulatory scrutiny.

The digital token last traded at $37,163.52 and on track for a 3.5% weekly advance.

Dollar stuck near 5-month low as caution reigns ahead of U.S. CPI, ECB tests

The dollar continued to hover near a five-month low versus major peers on Thursday as investors looked to key U.S. inflation data and a European Central Bank meeting later in the day to potentially set the direction for currency markets.

Investors have adopted a wait-and-see attitude all week, sucking volatility from the market and leaving major currencies mostly range-bound.

The dollar index has fluctuated narrowly around the psychologically important 90 level, and was last at 90.137.

The euro rose to a one-week high at $1.2218 on Wednesday only to finish little changed, and was essentially flat at $1.2178 in Asia.

The yen traded at 109.62 per dollar, also little changed from Wednesday and near the middle of the 109.19-110.325 range of the past two weeks.

Deutsche Bank’s Currency Volatility Index languished at its lowest level since February 2020.

The U.S. Labor Department’s consumer prices data has been much anticipated after last month’s report showed consumer prices increased by the most in nearly 12 years in April.

That has stoked bets that higher prices could last longer than some anticipate, potentially calling into question the Federal Reserve’s insistence that current inflation pressures are transitory and monetary stimulus should stay in place for some time yet.

Economists polled by Reuters estimated the CPI advanced 0.4% in May.

While the greenback has kept to tight ranges in the run-up to the report, benchmark 10-year Treasury yields — which helped drive the dollar index to a multi-year high earlier this year — has taken a sizeable step lower in the past week and was at 1.4874% in Asia from as high as 1.6350% on Friday.

“It feels like the balance of risk is tilted to the upside on U.S. CPI versus the consensus, which would favour a sell-off in Treasuries – (and thus) higher yields – and subsequently a stronger USD,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a note to clients.

“Bonds seem overbought.”

With the ECB, investors will be watching for any clues of an imminent slowdown to its bond-buying program.

While the ECB is widely expected to keep policy settings steady, the euro could be sensitive to changes in the bank’s economic forecasts or any signal that the pace of bond buying could be reduced in months ahead.

In crypto markets, bitcoin held gains from its biggest rally in four months on Wednesday, when it jumped nearly 12%. It last traded little changed at $37,097.02, after rebounding from a three-week low of $31,025 hit on Tuesday when signs of institutional investor caution and regulatory attention drove selling.

Dollar subdued as investors look to key U.S. inflation gauge

The U.S. dollar was subdued on Tuesday as investors looked to U.S. inflation data due later in the week after softer-than-expected jobs data quelled expectations of an early tapering in the Federal Reserve’s stimulus.

The euro fetched $1.21915, bouncing back from its three-week low of $1.2104 set on Friday while the dollar eased to 109.26 yen, losing steam after having hit a two-month high of 110.325 late last week.

The dollar’s index against a basket of six major currencies stood at 90.021, not far from 89.533, a 4 1/2-month low touched late last month.

“It’s not that the payrolls numbers were weak. But because so much expectation had been build up in advance, the dollar suffered a bit of setback,” said Shinichiro Kadota, senior currency strategist at Barclays.

Friday’s jobs data, which showed U.S. non-farm payrolls increasing by 559,000 in May, fell 90,000 jobs short of expectations.

The data helped to pin down U.S. bond yields near their recent lows, weighing on the dollar, while investors now looked to consumer price data on Thursday for fresh direction.

Many investors now expect the Fed to unveil a plan to reduce its bond purchase later this year, and actual tapering to start early next year.

The British pound hardly budged at $1.4169 while the Australian dollar was unchanged at $0.7753, both stuck in ranges seen over the past couple of months.

With recent trading ranges tight, implied volatilities on both currencies have dropped to their lowest levels since early 2020, before markets were pummeled by the COVID-19 pandemic.

Elsewhere, the Mexican peso held firm at 19.832 to the U.S. dollar, near its highest level since late January, after midterm elections confirmed President Andres Manuel Lopez Obrador’s MORENA party as the strongest force in the country, but with a reduced majority.

In contrast, the Peruvian sol tumbled to an all-time low of 3.9367 per dollar as socialist Pedro Castillo edged ahead of right-wing rival Keiko Fujimori in the country’s presidential election vote.

Cryptocurrencies were also little moved. Bitcoin traded flat at $33,564, while ether stood at $2,581.

Dollar edges up, recovering from jobs miss

The dollar edged up as European markets opened on Monday, recovering from Friday’s drop on U.S. jobs data which was below expectations.

The jobs data was seen as a relief for markets because it showed a pick-up in job growth was not strong enough to raise expectations for the U.S. Federal Reserve to tighten its monetary policy any sooner, hurting the dollar.

There was little risk appetite in currency markets in early trading, as equities dipped amid caution in global markets ahead of U.S. inflation data and the European Central Bank meeting, both on Thursday.

At 0715 GMT, the dollar index was up 0.2% on the day at 90.283. The euro was down 0.2% against the dollar, at $1.21465.

The Australian dollar, which is seen as a proxy for risk appetite, was 0.2% lower at 0.7727.

Dovish rhetoric from ECB policymakers suggests the bank is in no hurry to slow the pace of buying under the 1.85 trillion euro ($2.24 trillion) Pandemic Emergency Purchase Programme (PEPP).

Meanwhile U.S. Federal Reserve policymakers have begun inching toward a discussion about winding that help back.

“A divergence has opened up recently between the ECB and Fed who have signalled a willingness to discuss QE tapering at upcoming meetings,” MUFG currency analyst Lee Hardman wrote in a note to clients.

“It will help dampen upward momentum for EUR/USD. However, the developments are not sufficient to alter our bullish outlook the pair beyond the near-term.”

Speculators decreased their net short dollar positions in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

China’s yuan hovered around the key 6.40 level, with the offshore yuan changing hands at 6.3961 at 0732 GMT.

China’s export growth missed forecasts, while imports grew at their fastest pace in 10 years in May, fuelled by the surging demand for raw materials, data on Monday showed.

“In general, the trade sector continues the strong performance indicating that the manufacturing sector remains the leading role in the post-pandemic recovery,” wrote Commerzbank senior economist Hao Zhou in a note.

“However, the trade data might have little FX market impact, as the authorities vow to keep a stable currency for the time being.”

Elsewhere, the United States, Britain and other large, rich nations reached a landmark deal on Saturday to squeeze more money out of multinational companies such as Amazon and Google and reduce their incentive to shift profits to low-tax offshore havens.

While investors were wary of how tech stocks would react, in terms of currency markets, ING strategists wrote in a note to clients that the plans for a minimum global corporate tax rate of at least 15% could result in a repatriation of global capital over a longer term which would be positive for the dollar.

“Our thoughts here are that the removal (of) tax havens could have implications for the hundreds of billions of dollars of cash parked overseas by US multi-nationals – reducing the incentives to keep cash overseas,” they said.

In cryptocurrencies, Bitcoin was up 1% around $36,166, while ether was up 2% at $2,766. Both were trading within the month’s relatively narrow ranges.

Dollar jumps as strong run of data turns all eyes to payrolls

The dollar was perched near multi-week highs on Friday, basking in its biggest gains in about a month after robust jobs data threw investors’ focus on to the strength of the U.S. recovery and on the possibility of it driving policy tightening.

The next test comes later in the day when U.S. non-farm payrolls data is published. The Street’s consensus forecast is for about 650,000 jobs to have been added in May, though the “whisper number” among traders is higher, closer to 800,000.

Private payrolls — a bit of an unreliable guide — delivered a big beat overnight with an increase of 978,000, against forecasts of 650,000, which sent the dollar rallying.

It lifted 0.7% to a three-week high of $1.2118 per euro and rose by the same margin to a two-month high of 110.32 yen. Gains topped 1% against the Aussie and the kiwi, which fell from recent ranges to their lowest in weeks.

China’s offshore yuan softened past 6.4 per dollar in early Asia trade, while other moves were only slight as markets now await the payrolls figures, due at 1230 GMT, with options trade showing it is expected to trigger volatility.

“Clearly traders are covering dollar shorts into the jobs data,” said Chris Weston, head of research at brokerage Pepperstone in Melbourne.

He reckons, as a rough guide, that a million or more jobs might see the Aussie fall by another 1%, the euro drop about 0.8% and the dollar/yen exchange rate gain that amount as traders factor in a policy response to the strong economy.

“Between 250k-500k jobs and we’ll potentially see dollar/yen fall 0.6% to 0.8%,” Weston said. “A number in line will not give us much to work with, so the moves in the market will be dictated by the broad quality of factors – revisions to the April print of 266k, the unemployment rate, hourly earnings.”

At issue is whether the figure points to the sort of hiring that could reel in pandemic job losses, lift wages and drive broad U.S. growth that increases the trade deficit and weighs on the dollar – or whether things feel like they are overheating.

Positioning data shows investors heavily short dollars, leaving the market hypersensitive to any suggestion of a change in direction for the currency or a shift in the rates outlook – hence the options market is priced for a bumpy ride.

Overnight implied dollar/yen volatility shot up to a month high above 8% on Thursday and euro/dollar implied volatility hit its highest since mid-March.

Brian Daingerfield, head of G10 currency strategy at Natwest, sees a payrolls print around 550,000 as the “goldilocks” number: “strong enough to keep the recovery going but not strong enough to pull tapering fears forward.”

That could weaken the dollar broadly, he said, offsetting Thursday’s moves, while bonds could recover lost ground. Benchmark ten-year U.S. Treasury yields rose 3.6 basis points to 1.6300% overnight and opened near that level in Tokyo on Friday.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, rose 0.7% on Thursday to stand at a three-week high of 90.574 on Friday.

The Australian dollar was licking wounds at $0.7652, after falling to its lowest since mid-April overnight, while the kiwi was parked at $0.7136 after slipping to its cheapest since early May on Thursday.

Sterling was steady at $1.4099 in Asia after dropping through its 20-day moving average as the dollar climbed. The yuan fell to 6.4014.

Cryptocurrencies held on to several days of gains to leave bitcoin at $38,737 and on course for its best week in a month.