FX Rate News

U.S. jobs data caused some investors to scale back bets on a rebound in the greenback.

The euro held gains versus the dollar but faces a test later on Monday with data that is expected to show German industrial output growth slowed at the end of last year.

Speculators have been reducing short positions in the dollar, but some analysts say better U.S. economic data and continued progress in fighting the coronavirus pandemic will be needed for further dollar gains.

“Soft non-farm payrolls has really pulled the ladder out from under the dollar,” said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities.

“Now the markets are questioning whether the dollar can rise any further. A lot depends on the coronavirus, but we also need to know when U.S. fiscal stimulus will pass.”

Against the euro, the dollar traded at $1.2048 after a 0.7% slump on Friday.

The British pound bought $1.3736, close to an almost three-year high.

The dollar was quoted at 105.38 yen, having pulled back from a three-month high reached on Friday.

The U.S. economy created fewer jobs than expected in January while job losses the previous month were deeper than initially reported, data at the end of last week showed.

The release of U.S. consumer prices and consumer sentiment later this week will help determine whether a recent rise in inflation expectations and Treasury yields was justified.

Any disappointing numbers from either report could knock the dollar lower, some analysts warn.

The dollar index against a basket of six major currencies stood at 91.084, nursing a 0.6% loss from Friday.

Speculators’ net bearish bets on the dollar fell to $29.95 billion for the week ended Feb. 2, compared with a net short position of $33.81 billion for the previous week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data.

In the cryptocurrency market, ethereum fell 3.88% to $1,615, extending a pullback from a record high ahead of the listing of ethereum futures on the Chicago Mercantile Exchange.

Bitcoin, the most popular cryptocurrency, fell 0.88% to $38,936.

Elsewhere, the Australian dollar held steady at $0.7678. Across the Tasman Sea, the New Zealand dollar edged up to $0.7209.

The dollar climbed toward a fifth straight daily gain on Thursday on confidence in the U.S. economic outlook and the possibility that Friday’s jobs report will be stronger than expected.

The U.S. dollar index rose 0.5% in New York afternoon trading to 91.509, up 1.7% for the year and its highest level in two months.

The move came with a 0.6% decline in the euro, which fell to $1.1966, below what had seemed a resistance level of $1.20 earlier this week. It was its first move below $1.20 since Dec. 1.

The dollar also gained 0.4% against the yen, rising to 105.53, the highest level since Nov. 11.

After the dollar index lost 7% last year, its gains since December have come on short covering and a view that the U.S. economy’s recovery from the COVID-19 pandemic will be stronger than in other countries.

“There’s a fundamental shift here in the short term where we are seeing the U.S. economic outlook really overpowering what we are seeing in the euro zone,” said Ed Moya, senior market analyst at OANDA.

That view was reinforced on Thursday when the U.S. government said the number of Americans filing new applications for unemployment benefits decreased last week.

Initial claims for state unemployment benefits totaled a seasonally adjusted 779,000 last week, better than economists had forecast and better than 812,000 in the prior week. The government will release on Friday its payroll job count for January, and economists are expecting a gain of 50,000 after a December decline of 140,000.

The dollar’s move came as longer-term U.S. Treasury yields rose on Thursday as investors positioned for a large pandemic relief package from Washington and a stabilizing U.S. labor market.

Longer-term U.S. Treasury yields rose as traders positioned for a large stimulus package from Washington. The 10-year yield was up one basis point in afternoon trading at 1.14% and at one point reached 1.16%, its highest since Jan. 12.

Democrats in the U.S. Senate were poised for a marathon “vote-a-rama” session aimed at overriding Republican opposition to President Joe Biden’s $1.9 trillion COVID-19 relief proposal.

At the same time, the British pound dove as much as a half percent on the day ahead of scheduled comments by the Bank of England about the possibility of negative interest rates and then rebounded to trade up 0.3% after the central bank comments.

The bank said it would ask banks to get ready for the possibility of negative rates, but indicated that financial markets should not expect sub-zero borrowing costs for at least six months, if at all.

It added that while it expects Britain’s economy to probably shrink by 4% in the first three months of 2021, it should recover rapidly towards pre-COVID levels over the year.

“The thing to monitor is how quickly Europe can get out the vaccine. If we see continued slowness there, you will see the gap widen between euro and dollar,” said Justin Onuekwusi, portfolio manager at Legal & General.

Cryptocurrency ethereum, which had gained 10% on Wednesday, slipped as much as 1% on Thursday after reaching an all-time high of $1,698.56 ahead of the launch of ethereum futures on the Chicago Mercantile Exchange next week.

Bitcoin was also off 1% on Thursday at $37,320.

Cryptocurrencies are gaining traction with more mainstream investors and their total market value topped $1 trillion for the first time in January.

The dollar traded near a two-month high versus the euro on Wednesday as investors looked to a widening disparity between the strength of the U.S. and Europe’s pandemic recoveries.

The view was bolstered by moves in Washington toward fast-tracking more stimulus spending that contrasted with concerns about extended European lockdowns and expectations for a decline in euro zone growth this quarter.

The dollar was little changed at $1.2038 per euro early in the Asian session, after strengthening to $1.20115 overnight for the first time since Dec. 1.

The broader dollar index was mostly flat at 91.081 after rising to a two-month high of 91.283 in the previous session.

The greenback’s advances come despite a rise in equities amid improving risk sentiment, defying the currency’s historic inverse directional relationship with stocks.

However, many analysts expect the correlation to reassert itself as the year progresses, and for the dollar to decline as global growth recovers amid massive fiscal stimulus and ultra-easy monetary policy.

“The relative growth dynamics between Europe — weak — and the U.S. — better — are favouring the USD at the moment, but it remains to be seen if this can be a longer-lasting theme,” wrote National Australia Bank FX strategist Rodrigo Catril, who expects the euro to weaken below $1.20 in the near-term.

The dollar also benefited from a massive bout of short-covering, especially against the yen where hedge funds had racked up their biggest short bets against the greenback since October 2016.

The U.S. currency was little changed at 105.025 yen after gaining to 105.17 overnight for the first time since Nov. 12.

Many see the dollar’s rebound since early last month as a correction after its relentless decline last year, although some think the dollar’s new-found firmness could reflect a retreat of the bearish sentiment on the currency.

The dollar index has rebounded 1.2% this year after an almost 7% decline in 2020.

“The bear case is facing a short-term stress test,” Westpac strategists wrote in a note.

“Our base case is that without short-term yield support there’s a limit to how far U.S. recovery optimism can boost the USD,” they wrote. “Global reflation and the Fed’s determined dovish stance limits upside potential beyond that.”

The dollar hovered near a seven-week high on Tuesday, benefiting from a euro selloff overnight after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in the over-crowded dollar-selling positions.

The euro sank the most in 2-1/2 weeks on Monday after data showed retail sales in Europe’s biggest economy plunged by more than forecast in December, with the continent still struggling with vaccine rollouts.

“When people think about selling euros, invariably you get some buying of dollars, because the euro-dollar exchange rate is easily the most liquid in the world,” said Commonwealth Bank of Australia currency analyst Joseph Capurso.

A buy back into the U.S. currency was long overdue, some analysts said, with speculators’ net dollar selling near a 10-year peak.

Speculators have bet on a fall in the safe-haven U.S. dollar as the Biden administration’s proposed 1.9 trillion stimulus has encouraged investors to put money in riskier assets, even as a group of Republican senators visited the White House to discuss a $618 billion alternative plan.

“Some hedge funds may be forced to unwind their dollar short positions after they got burned by recent short squeeze in some U.S. shares,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

On the whole, global markets remain wary, with institutional investors trying to get to grips with the retail trading frenzy that boosted GameStop Corp and other so-called meme stocks in recent sessions despite no change in their fundamentals.

The dollar index eased a touch by 0.1% to 90.87 amid further gains for Asian stocks but stayed not far from its overnight high of 91.063, its highest since Dec. 10.

The euro edged up 0.2% to $1.20805 after dropping 0.7% on Monday, the most since Jan. 15.

Against the yen, the dollar briefly crossed 105 yen for the first time since mid-November and held firm at 104.875 yen.

Many see the dollar’s rebound since early last month as a correction after its relentless decline — the dollar index lost almost 7% in 2020 — on expectations of a global pandemic recovery amid massive fiscal spending and continued ultra-easy monetary policy.

Yet some think the dollar’s new found firmness could reflect a retreat of the bearish sentiment on the currency.

“U.S. interest rates are perhaps on the rise because of the fiscal stimulus and the fact that U.S. economy is holding up well,” said Moh Siong Sim, currency analyst at Bank of Singapore.

“The weak dollar trend has also stalled, and the drift down in dollar/yen has been part of that trend and it has lost a bit of momentum.”

Elsewhere, the Australian dollar pared gains after the country’s central bank said it will extend its quantitative easing program to buy additional $100 billion of bonds, a decision that many market players thought could wait until next month.

The Aussie last stood at $0.7625, almost flat on the day and off the day’s high of $0.7662.

Technically Chana market is under fresh buying as market has witnessed gain in open interest by 3.05% to settled at 33780 while prices up 12 rupees.

Now NCDEX Chana is getting support at 4474 and below same could see a test of 4448 levels, and resistance is now likely to be seen at 4521, a move above could see prices testing 4542.

Chana yesterday settled up by 0.27% at 4500 as Nafed’s unstable chana releasing strategy continues to affect market directly at a time when area is up by 5 % and the new crop is hardly one and a half month away. Pulses sowing area jumped by nearly 109% to 8.55 lh.

Chana acreage has soared by 115% to 8.03 lh. Nafed continued to fix reserve price and changed it frequently from Rs 5600 to Rs. 5100, again Rs. 5100 to Rs. 4875. Apart from it has offered 5 to 10 % discount over previous MSP on particular centers.

As offtake from central pool is lower, Nafed may decrease price further to vacate storage space for new procurement. It would not allow chana cash market to go up beyond a certain level. Delhi chana is being traded at Rs4550-4650.

Demand is weak. Weather condition in Jan –Feb remains crucial. The latest data shows that the total area of pulses has increased by 7% to 141 lakh hectares. More sowing is done in Maharashtra, Odisha and Jharkhand as compared to last year.

Gram cultivation has increased by about 10%. NAFED to sell Gram PSS Rabi-2020 stock from all the States at or above base prices of Rs. 5100 per quintal in the month of December 2020, it offers an initial quantity of 1.5 LMT of Gram, for the month of December 2020. In Delhi spot market, chana dropped by 35.4 Rupees to end at 4473.95 Rupees per 100 kgs.

Trading Ideas:
–Chana trading range for the day is 4448-4542.
–Chana gained as Nafed’s unstable chana releasing strategy continues to affect market directly at a time when area is up by 5 %
–Pulses sowing area jumped by nearly 109% to 8.55 lh.
–Nafed continued to fix reserve price and changed it frequently from Rs 5600 to Rs. 5100, again Rs. 5100 to Rs. 4875.
–In Delhi spot market, chana dropped  by 35.4 Rupees to end at 4473.95 Rupees per 100 kgs