FX Rate News

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.

The dollar traded near multi-month highs against most major currencies on Friday, supported by a wave of optimism due to improving U.S. economic data, the rollout of coronavirus vaccines, and rising Treasury yields.

The euro was in focus ahead of data on German business sentiment due later in the day, but the outlook for the common European currency has soured due to renewed coronavirus lockdowns and the slow pace of vaccinations across the European Union.

The greenback has more room to rise against the euro, but its gains against other currencies in the past few weeks have been so rapid that some analysts are warning against chasing the dollar higher from current levels.

“The euro has broken through the 200-day moving average, and that is a clear sign that it will continue to go lower,” said Minori Uchida, head of global markets research at MUFG Bank in Tokyo.

“The yen is getting strong on some of the crosses, which will cap dollar/yen. Yields have supported the dollar, but this move could start to run out of steam.”

Against the euro, the dollar was quoted at $1.1776, close to its strongest since November last year.

The dollar bought 109.21 yen, which is near its highest since June.

The greenback traded at 0.9396 Swiss franc, holding onto a 0.5% gain from the previous session.

One notable exception to the dollar’s gains was the British pound <GBP=D3>, which edged up to $1.3747 after rising 0.4% on Thursday. Data due later on Friday that is forecast to show a rebound in British retail sales could give the pound a further boost.

U.S. jobless claims fell to a one-year low last week and President Joe Biden said he will double his vaccination rollout plan after reaching his previous goal of 100 million shots 42 days ahead of schedule, both of which support optimism in the dollar.

The dollar index against a basket of six major currencies stood at 92.788, close to a four-month high.

Traders will look to data on U.S. personal consumption due later on Friday for further hints about the strength of the U.S. economy.

During European trading Germany’s Ifo survey is expected to show an improvement in business morale. But this is unlikely to halt the euro’s slide, because worries about the European Union’s slow vaccination rollout and bickering with former member Britain over vaccine exports have become a dominant theme, traders said.

The Australian and New Zealand dollars rebounded from sharp losses earlier in the week.

The two currencies are likely to remain supported because their relative success in limiting the economic fallout caused by the coronavirus pandemic, analysts said.

The dollar index wallowed just north of the 91.364 level touched overnight for the first time since Feb. 4. It has dropped around 0.6% this week, after retreating from a more than three-month high of 92.506 reached Tuesday.

The gauge remains 1.6% higher this year as it tracked benchmark 10-year Treasury yields from below 1% to as high as 1.625% at the end of last week, before their retreat to around 1.5% currently.

A benign consumer price index reading this week helped allay fears that increased fiscal stimulus and sustained ultra-easy monetary policy could lead the U.S. recovery to overheat.

Weekly employment data overnight, meanwhile, added to positive signals from the jobs market, as President Joe Biden signed his $1.9 trillion pandemic relief bill into law.

“Risk sentiment is back in the ascendancy,” Ray Attrill, head of forex strategy at National Australia Bank, wrote in a client note.

“A 1.5% rather than 1% risk-free rate is evidently no longer a problem for risk assets,” although for the dollar, “it still looks a bit premature to call a resumption of the 2020 downtrend with any degree of conviction.”

The Aussie traded at $0.77865, on the cusp of the one-week high of $0.7793 reached Thursday. New Zealand’s kiwi changed hands at $0.7223, near the one-week high of $0.7240 from overnight.

The euro also traded close to a one-week high of $1.1990.

On Thursday, the European Central Bank said it was ready to accelerate money-printing to keep eurozone yields down.

The dollar consolidated at around 108.60 yen, another safe-haven currency, after pulling back from a nine-month high of 109.235 reached on Tuesday.

Bitcoin last traded at $57,185.71, up more than 12% for the week, after topping $58,000 on Thursday for the first time since it set a record high at $58,354.14 on Feb. 21.

The dollar languished near one-week lows on Thursday after benign data on U.S. consumer prices and a decline in Treasury yields led some investors to trim bets on a rapid acceleration in inflation.

The euro was in focus ahead of a European Central Bank meeting later in the day where policymakers are expected to send a message that they will prevent bond yields from rising further and harming the bloc’s economic outlook.

The dollar index against six major currencies was flat at 91.79 after hitting a one-week low of 91.75 earlier in Asia as data showed U.S. core consumer price growth slowed slightly in February.

Against the euro, the dollar was quoted at $1.1932 per dollar, nursing a 0.2% loss from the previous session, while versus the safe-harbor Swiss franc, the greenback bought 0.9299 franc.

“The CPI was a useful reminder to market participants that U.S. inflation is still quite soft,” said Joe Capurso, currency analyst at Commonwealth Bank of Australia.

“It’s going to take a lot to get it up to the Federal Reserve’s target. Mainly, financial markets got too bullish too quickly about the Fed starting a rate hike cycle.”

The dollar and U.S. Treasury yields have been rising steadily due to expectations that the Fed’s loose monetary policy and fiscal stimulus will stoke inflation. The yield on the benchmark 10-year Treasury was at 1.528% on Thursday after hitting a one-year high of 1.626% last week.

Focus later in the day will be on an auction of 30-year U.S. Treasuries after an auction of 10-year notes on Wednesday drew sufficient demand, easing concerns about investors’ ability to absorb an increase in debt needed to finance the response to the pandemic.

Overall, analysts said sentiment for the dollar remained fairly positive as the U.S. economy recovers from the Covid-19 pandemic and as President Joe Biden’s $1.9 trillion stimulus bill won final approval in Congress.

The British pound bought $1.3935 after rising 0.3% on Wednesday.

The yen was the only major currency to cede ground to the dollar, falling about 0.2% to 108.55 yen.

Investors have been testing the ECB’s resolve to rein in rising bond yields. So far, the euro zone’s central bank has refrained from large-scale market intervention, and policymakers are divided on whether one is warranted ahead of their meeting on Thursday.

Policymakers have also expressed concern about strength in the euro, although a recent weakening of the currency has lowered expectations about major policy changes.

“With euro strength no longer a pressing issue and higher bond yields in focus instead, the ECB meeting should not be a risk event for the euro,” ING analysts said in a note.

Elsewhere, the Australian and New Zealand dollars rose for the third straight session against the greenback as sentiment toward the antipodean currencies remains strong due rising commodity prices and expectations for an acceleration in global trade.