FX Rate News

The U.S. dollar skidded toward a fourth straight weekly decline against a basket of major peers on Friday, as the Federal Reserve stuck to its message of ultra-low interest rates for longer.

The dollar index was on course to end the week 0.2% lower, bringing its losses for April to 2.7%. A four-week losing streak would be the longest since the six-week slide to the end of last July, and the monthly loss would also be the biggest since July’s 4% slump.

The Canadian dollar climbed to a more-than-three-year high of C$1.2268 per greenback on Friday, on track for a 1.6% weekly gain that would be its biggest since the start of November.

At the conclusion of the Fed’s latest policy meeting on Wednesday, Chair Jerome Powell acknowledged the U.S. economy’s growth, but said there was not yet enough evidence of “substantial further progress” toward recovery to warrant a change to its ultra-loose monetary settings.

That growth accelerated in the first quarter, buoyed by government stimulus checks, setting the course for what is expected to be the strongest performance this year in nearly four decades.

Signs that a strengthening economy, particularly in the labor market, might force the Fed into an earlier tapering of its asset-purchase program had pushed the dollar index, or DXY, to a five-month high at the end of March.

“DXY may attempt a rebound in coming days as expectations turn to a potentially blockbuster April payrolls next week, but gains will prove short-lived with Fed officials to underscore Powell’s resolutely dovish stance,” Westpac strategists wrote in a client note.

The gauge is likely to drop below 90 in the near term, from 90.6 currently, but the “DXY’s depreciation trend is likely more of an ongoing grind than a wholesale sharp setback,” they said.

The Fed’s dovishness was in marked contrast to the Bank of Canada, which has already begun to taper its asset purchases. Canada’s commodity-linked loonie got additional support from a surge in oil to a six-week peak along with higher lumber prices.

Rising commodity prices also supported the Australian dollar, which gained 0.2% to $0.77785, climbing back toward the six-week high of $0.78180 touched Thursday.

The euro has largely flat at $1.21165, near the two-month high of $1.2150 set the previous session. The shared currency is up 0.2% for the week and 3.3% for the month.

The yen, a traditional haven, saw opposite fortunes, hurt by a recovery in U.S. Treasury yields and a rally
to record highs for global stocks that sapped demand for the safest assets.

Japan’s currency changed hands at 108.81 per dollar, near the two-week low of 109.22 from Thursday, setting it up for a loss of about 0.9% for the week.

China’s yuan traded near its strongest since March 3 in the offshore market, last changing hands at 6.4635 per dollar, even as gauges of Chinese factory activity showed a loss of momentum in April.

The yuan has jumped some 1.5% this month from a four-month low of 6.5875 on April 1, but Mizuho strategist Ken Cheung wrote in a client note that a re-pricing of growth trajectories for China versus the United States will keep the rally in check from here.

In cryptocurrencies, ether hovered below a record high of $2,800.89 set on Thursday, after being lifted this week on media reports about the European Investment Bank’s plans to launch a “digital bond” sale on the ethereum blockchain network.

“The use case of ethereum has just grown exponentially, particularly with wider use of non-fungible tokens (NFTs), said Tim Frost, the chief executive at fintech company YIELD App.

“All signs point to a continued bull market.”

Bigger rival bitcoin traded at $54,256.24, vacillating around that level this week after dipping as low as $47,004.20 on Sunday, following a sharp retreat from the record high of $64,895.22 marked in the middle of the month.

The dollar edged lower on Monday amid speculation that U.S. Federal Reserve Chairman Jerome Powell will shun talk of tapering bond purchases at a policy meeting this week.

The euro rose to a near two-month high against the greenback before data later on Monday forecast to show an improvement in German business sentiment, which would bolster hopes for a brighter economic outlook.

Powell is likely to face questions over whether an improving labour market and rising coronavirus vaccinations warrant a withdrawal of monetary easing, but most analysts expect him to say such talk is premature, which would put downward pressure on Treasury yields and the dollar.

“The dollar is likely to continue to trend lower in line with the gathering momentum in the world economy,” analysts at Commonwealth Bank of Australia wrote in a research note.

“We expect the Fed policy meeting to be a non-event for the dollar. The U.S. economy is a long way from meeting the ‘substantial further progress’ threshold for the Fed to taper its asset purchases.”

The dollar stood at 107.75 yen, close to its lowest since March 4.

The euro rose to $1.2110, adding to gains made on Friday after positive data on European services and manufacturing activity.

A survey from Germany’s Ifo institute due later on Monday is expected to show business conditions continued to improve in Europe’s largest economy.

The British pound was quoted at $1.3897, adding to a 0.3% gain in the previous session.

The dollar was little changed at 0.9128 Swiss franc, close to a two-month low.

The Fed’s next meeting ends on Wednesday, and while no major policy changes are expected, investors will pay close attention to Powell’s comments after the meeting.

Rising coronavirus vaccination rates and an improving economic outlook are reasons to be optimistic, but many traders and analysts say Powell is likely to reiterate his commitment to keep easy policy in place for an extended period.

U.S. funds have been selling the dollar against the yen recently in Asian trading, which is an additional sign that major investors expect lower U.S. Treasury yields to push the dollar lower, some traders in Tokyo said.

In emerging markets, traders are watching the Turkish lira to see if it will test its all-time low of 8.58 per dollar due to worsening relations with the United States and worries about a dovish central bank governor. The lira was last quoted at 8.4285.

The onshore yuan edged up to 6.4866 per dollar, just shy of a six-week high.

Elsewhere, the Australian and New Zealand dollars rose toward one-month highs but are likely to track moves in global commodity prices, traders said.

In the cryptocurrency market, Bitcoin reclaimed the $50,000 mark and smaller rival Ether rose, recouping some of their losses from last week triggered by U.S. President Joe Biden’s plan to raise capital gains taxes for wealthy investors.

The dollar stood near three-week lows against the euro and the yen on Wednesday, after a larger-than-expected uptick in a U.S. consumer price gauge did not spark wider fears about accelerating inflation and the Federal Reserve’s tapering.

The dollar traded at 109.03 yen, near its lowest since late March, while the euro popped up to $1.1948, hitting its highest level since late March, as it extended a rally from a five-month low of $1.1704 set on March 31.

While the dollar was stuck near its familiar ranges against most other currencies, the dollar’s index against a basket of six major units hit a three-week low of 91.791 and last stood at 91.831.

The greenback’s fall came as the U.S. consumer price index jumped 0.6% in March versus the previous month, the largest gain since August 2012, and rose 2.6% from a year earlier, both 0.1 percentage point above market expectations.

The core CPI, which excludes volatile foods and energy, was also a tad stronger than expected, with a year-on-year increase of 1.6%.

“Inflation has been expected to accelerate in the April-June quarter. Although the latest reading was a bit stronger than expected, it wasn’t out of the blue,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

Speculation that firmer inflation could propel the Federal Reserve to reduce its quantitative easing and low interest rates earlier than it has pledged has been a major driver of the dollar’s rally in the first quarter.

The dollar lost steam however as U.S. bond yields dipped on Tuesday, thus reducing the currency’s yield attraction, as solid demand for a 30-year bond auction trumped any worries about inflation.

The U.S. central bank has said it will look through temporary increases in inflation, and analysts expect it will allow inflation to run hotter than previously expected before raising rates.

Philadelphia Fed Bank President Patrick Harker said on Tuesday it is unlikely that inflation will run out of control this year.

Still many investors are wary of risk of further acceleration in the U.S. economy as vaccination rollouts have moved fast, allowing economic activities to restart.

“Eventually there will be another large scale fiscal stimulus, which should support the dollar,” Mizuho’s Yamamoto also added.

Elsewhere, the Singapore dollar rose 0.2% to S$1.3386 per U.S. dollar after the Monetary Authority of Singapore (MAS) left its exchange-rate policy settings unchanged.

The Russian ruble gained about 2% overnight after U.S. President Joe Biden called on Russian President Vladimir Putin to reduce tensions between Russia and Ukraine.

Biden phoned Putin to propose they meet in a third country, in a sign of concern about tensions spinning out of control in the Ukraine crisis.

In crypto, bitcoin traded at $63,287 after hitting a record high of $63,769, ahead of the listing of shares in cryptocurrency platform Coinbase on Nasdaq.

The dollar hovered near a three-week low against major rivals on Tuesday, pressured by lower Treasury yields as traders awaited highly anticipated U.S. inflation data later in the global day.

The greenback has retreated along with U.S. yields this month after surging to multi-month peaks on expectations that massive fiscal stimulus coupled with continued monetary easing will spur faster U.S. economic growth and higher inflation.

Retail sales figures due Thursday will also be closely watched.

Boston Federal Reserve Bank President Eric Rosengren said on Monday that the U.S. economy could see a significant rebound this year thanks to accommodative monetary and fiscal policy, though the labor market still has much room for improvement.

The dollar index, also known as DXY, edged slightly higher to 92.170 early in the Asian session, but still near Thursday’s low of 91.995, which was the weakest since March 23. It had rallied to a nearly five-month high of 93.439 on the last day of March.

“DXY has been slipping in recent days but should find stability with the U.S. macro outperformance narrative set to get a strong airing” in data this week, Westpac strategists wrote in a client note, projecting a rally toward 94.500.

“Treasury issuance is surging at the same time as inflationary pressures show in the data, which should lift the U.S. dollar.”

Westpac expects 10-year Treasury yields to rise toward the top of its recent 1.6-1.755% range this week.

The benchmark yield was at 1.6764% on Tuesday. It had surged to a more than one-year high of 1.7760% on March 30.

New supply is also a driver of yield direction this week, with the Treasury selling 30-year bonds on Tuesday, following good demand at auctions of three- and 10-year notes on Monday.

“How Treasury yields react to this week’s supply and to key U.S. data releases will undoubtedly provide direction for the USD in the near-term,” Rabobank currency strategist Jane Foley wrote in a report.

“A strong (CPI) print may re-invigorate inflation fears and lend support to the USD.”

The dollar languished near 2-1/2-week lows against major peers on Monday as a decline in Treasury yields restrained the U.S. currency.

The British pound sank toward a two-month low, continuing its decline from a nearly three-year high reached in February, with analysts pointing to blood clot concerns around the AstraZeneca vaccine, which the U.K. has relied heavily on for its aggressive vaccination program.

Bitcoin traded above $60,000, closing the gap to its record high.

Both the dollar and Treasury yields are taking something of a breather after scaling multi-month peaks at the end of last month, powered by bets that an accelerating U.S. recovery from the pandemic will lift inflation faster than Federal Reserve policymakers anticipate.

While the Fed’s repeated insistence that near-term price pressures will prove transitory has soothed investors this month, the dollar firmed on Friday following stronger-than-expected producer price data, taking the edge off the currency’s worst week this year.

The dollar index, which tracks the greenback against a basket of six rivals, was little changed at 92.304 in Asia, following a 0.9% slump last week. It dipped below 92 on Thursday for the first time since March 23.

The benchmark 10-year Treasury yield was at 1.6622% after dropping as low as 1.6170% last week. It had surged to a more than one-year high of 1.7760% on March 30.

“Key for the near-term outlook will be whether yields continue to consolidate around these levels, or march higher,” which would support the dollar, National Australia Bank strategist Tapas Strickland wrote in a client note.

“The broader thematic of a rapid rebound in the U.S. economy on the back of an impressive vaccine rollout continues.”

Data on Friday showed the largest annual gain in 9-1/2 years for U.S. producer prices, backing expectations for higher inflation as the economy reopens amid an improved public health environment and massive government funding.

U.S. consumer price data will be released Tuesday.

Fed Chair Jerome Powell speaks on Wednesday at the Economic Club of Washington. In an interview on Sunday on CBS’s “60 Minutes,” Powell said the U.S. economy is at an “inflection point” with expectations that growth and hiring will pick up speed in the months ahead, but he also warned of risks stemming from a hasty reopening.

Against the euro, the dollar hovered near the lowest since March 23 at $1.1901. It bought 109.66 yen, close to a two-week low below 109 reached on Thursday.

“USD has some upside potential this week,” Commonwealth Bank of Australia strategist Kimberley Mundy wrote in a report.

“Strong U.S. economic data will highlight the divergence between the U.S.’s fast economic recovery and the more stunted recoveries in other developed economies.”

The dollar can lift back toward 110 yen, while the euro has scope to retrace most of that recent gains from its almost five-month low near $1.17, she said.

The British pound slipped 0.2% to $1.36745, nearing Friday’s low of $1.3670, a level not seen since Feb. 8.

Bitcoin traded at $60,102.69 after rising as high as $61,222.22 over the weekend, approaching the record peak of $61,781.83 set one month ago.

Miners have not been selling recently minted tokens at a time of greater demand from corporations and investors, according to Justin d’Anethan, sales manager at digital asset company Diginex in Hong Kong.

The U.S. dollar fell to a two-week low against a basket of currencies on Tuesday, as traders booked profits after a strong March and as a fall in Treasury yields from recent peaks put pressure on the U.S. currency.

The U.S. Dollar Currency Index, which measures the greenback against a basket of six currencies, was 0.239% lower at 92.341, its lowest since March 23.

The dollar has risen this year, along with Treasury yields, as investors bet the United States would recover more quickly from the coronavirus pandemic than other developed nations, amid massive stimulus and aggressive vaccinations.

At 2.5%, the gain in March was the dollar’s biggest monthly increase since the end of 2016.

“I think we are seeing some profit-taking to start the new quarter,” said John Doyle, vice president of dealing and trading at FX payments firm Tempus Inc.

“Treasury yields have played a role in helping the dollar find its footing. Lower yields today would add fuel to the equity fire and diminish demand for the greenback too.”

U.S. Treasury yields fell on Tuesday, while U.S. stocks hit a fresh high, further sapping demand for the safe-haven U.S. currency.

Against the Japanese yen, the dollar slipped 0.29% to 109.855 yen, a one-week low.

The International Monetary Fund raised its outlook for global economic growth again on Tuesday, forecasting worldwide output would rise 6% this year, reflecting a rapidly brightening outlook for the U.S. economy.

The upbeat assessment follows an encouraging U.S. jobs report on Friday and a solid U.S. services activity reading on Monday.

“The uptick in sentiment is likely a result of the IMF upgrading their global growth forecasts,” said Doyle.

Speculators’ net bearish bets on the U.S. dollar fell in the latest week to the lowest since June 2020, calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday showed.

Sterling slipped on Tuesday as investors withdrew some cash after cable jumped to its highest in more than two weeks, while traders continued to bet on a speedy reopening of the British economy.

Major cryptocurrency Ethereum reached a peak of $2,151.63 on Tuesday, before paring gains.

The rise of Ethereum, which like most smaller cryptocurrencies tends to move in tandem with bitcoin, has helped the cryptocurrency market capitalization reach a record $2 trillion on Monday, data and market trackers CoinGecko and Blockfolio showed.

The U.S. dollar traded near its lowest in more than two weeks versus major peers on Thursday, tracking Treasury yields lower, after minutes of the Federal Reserve’s March policy meeting offered no new catalysts to dictate market direction.

Fed officials remained cautious about the risks of the pandemic – even as the U.S. recovery gathered steam amid massive stimulus – and committed to pouring on monetary policy support until a rebound was more secure, the minutes showed Wednesday.

Fed Chair Jerome Powell will speak at a virtual International Monetary Fund conference later on Thursday.

The dollar index which measures the U.S. currency against a basket of six currencies, edged lower to 92.39 in London trading, after dipping as low as 92.134 on Wednesday for the first time since March 23.

The index rallied to an almost-five-month high of 93.439 at the end of last month as the U.S. pandemic recovery outpaced that of most other developed nations, particularly in Europe.

“The Fed minutes delivered no negative surprise for risk sentiment, with the committee reiterating no need to rush into tightening of monetary conditions and further support the recovery,” said Petr Krpata, chief EMEA FX and interest rates strategist at ING.

“We expect the very accommodative Fed to eventually weigh on USD as we move into the summer – rising inflation, yet no signs of imminent rate hikes will push front-end US real rates further into the deep negative, and coupled with the recovering global economy (which should be of a more synchronized nature in 2H21), should weigh on USD.”

The benchmark 10-year Treasury yield was around 1.647% on Thursday, after dipping below 1.63% overnight. It hit 1.776% late last month, its highest in more than a year.

The S&P 500 eked out a modest gain on Wednesday, moving mainly sideways since surging to a record high to start the week.

The chief currency strategist at Citigroup Global Markets Japan, Osamu Takashima, said that the market’s direction is difficult to call, but expects the next move for the dollar to be lower.

“Current market sentiment is mild risk-on, and under such circumstances the dollar will weaken gradually – but no big moves,” he said.

The retreat in U.S. yields has also removed a driver for dollar gains, he added.

The dollar weakened to 109.49 yen , consolidating after retreating from 110.97, its highest in more than a year, reached on March 31.

The euro traded 0.1% lower at $1.1863, after rebounding from $1.1704, its lowest in almost five months, touched on March 31.

“The vaccination progress in the Eurozone is significantly lagging that of the U.S., and coronavirus infection rates in the Eurozone are on the rise again,” Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note.

“As such, EUR/USD is vulnerable to a move lower towards 1.1700 in the near‑term.”

The dollar fell on Thursday, consolidating recent gains that pushed it to nearly three-year highs during the first quarter, but the outlook remained upbeat in the wake of improving economic prospects backed by the Biden government’s more than $2 trillion stimulus plan.

Investors are now looking to Friday’s non-farm payrolls report to confirm their positive view on the dollar and the economy.

The dollar gained 3.6% against a basket of six currencies in the first three months of the year, its best quarterly performance since June 2018, with investors betting on a swift and robust economic recovery.

“We’re seeing the U.S. growth outlook just crushing Europe’s,” said Edward Moya, senior market analyst, at online FX trading platform, OANDA.

“The Biden administration is not even three months on the job and it’s about to deliver its second multi-trillion-dollar stimulus package. We’ll probably see the U.S. run hot and that’s probably driving the rise in Treasury yields including the dollar.”

U.S. President Joe Biden announced on Wednesday his long- awaited $2 trillion-plus job plan, including $621 billion to rebuild infrastructure.

Meanwhile, U.S. data showed strong growth prospects.

A report on the U.S. manufacturing sector showed a stronger-than-expected reading of 64.7 in March, the highest in more than 37 years. That was offset, though, by slowing construction spending, which fell 0.8% in February, and an increase in U.S. jobless claims in the latest week.

In afternoon trading, the dollar index slipped 0.3% to 92.933.

The dollar though slipped a bit after the jobless claims report, with claims of 719,000 in the week ended March 27.

The dollar index’s gains in the first quarter came as the euro, the biggest component in the index, struggled on concerns the euro zone’s recovery is being hampered by a third wave of COVID-19 infections.

France’s President Emmanuel Macron ordered the country into its third national lockdown and said schools would close for three weeks. The euro zone also lags the United States in vaccination programs.

Sentiment toward Europe, though, received a boost when data showed euro zone monthly factory activity growth galloped at its fastest pace in the nearly 24-year history of a leading business survey.

The euro was last up 0.3% at $1.1768.

The dollar was down 0.1% against the yen at 110.61 yen, after ending March with its biggest monthly gain since November 2016. It rose as high as 110.97 on Wednesday, the highest in a year. The U.S. non-farm payrolls report is the major data release this week, with economists expecting an increase of about 650,000 jobs in March.

“Considering the recent price action, the risk of a selloff in the U.S. dollar is elevated if the jobs report fails to meet expectations,” said Matt Weller, global head of market research at FOREX.com and City Index.

“In that scenario, the beaten-down euro/dollar could have room to recover back toward its 200-day (exponential moving average) and the previous support level near $1.1830 through early next week.”

In observance of Good Friday, Reuters will not be putting out market reports during the European hours.