FX Rate News

The dollar advanced on Wednesday, hitting a four-month high against the yen as U.S. bond yields jumped on the prospects of further economic recovery and a possible acceleration in inflation.

Bitcoin held firm, a day after the cryptocurrency hit $50,000 for the first time, bringing its total market capitalization to more than $900 billion, as traders bet on its further acceptance among major companies.

The dollar’s index against six other major currencies jumped back to 90.681, from a three-week low of 90.117 hit on Tuesday

Boosting the dollar was soaring U.S. bond yields, with the 10-year yield rising to 1.331% from around 1.20% at the end of last week.

“The move up in yields has been driven by increasing inflationary concerns amid a rise in energy prices along with the prospect of a big U.S. fiscal stimulus and the global recovery entering a more solid stage as vaccine roll out lead to the reopening of economies,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.

The yen, which is sensitive to U.S. yields, reacted the most with the dollar jumping to a four-month high of 106.225 yen. It last stood at 106.13 yen.

“I think the dollar’s downtrend is over. At the start of the year, speculators were betting on a fall in the dollar below 100 yen. They seem to have abandoned such a view now,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

The euro slipped slightly to $1.2085 though its fall was less pronounced due to its gains earlier on Tuesday following strong German economic sentiment data.

The New York Federal Reserve’s Empire State manufacturing report released on Tuesday offered an upbeat economic picture, with a rise in its “prices paid index” stoking fear of faster inflation.

That optimism was echoed by St. Louis Fed President James Bullard, who told CNBC that U.S. financial conditions were “generally good,” and that inflation was likely to heat up this year.

San Francisco Fed President Mary Daly, however, said pressures on inflation are still downward, pushing against critics warning low interest rates and government spending could overheat the U.S. economy and spark high inflation.

“Her comments are not resonating with market players preoccupied with inflation at this point,” said Daiwa’s Ishizuki.

The positive mood on the economic outlook is underpinning risk-sensitive currencies.

The British pound held firm at $1.3863, having reached its highest level since April 2018 on Tuesday. Against the euro, the pound traded at its highest level since early May at 87.07 pence per euro.

The Australian dollar stood at $0.7734, down slightly but still not far from Tuesday’s one-month high of $0.7805.

The offshore Chinese yuan also stepped back after hitting a 2-1/2-year high of 6.4010 per dollar and last stood at 6.4269.

The U.S. dollar was pinned down on Tuesday, as vaccine optimism boosted the British pound to an almost three-year high, while rising oil prices and buoyant expectations for global recovery supported commodity and trade-exposed currencies.

In trade thinned by Lunar New Year holidays in China and Monday’s U.S. holiday, the positive mood also weighed on the safe-haven yen which made a one-week low on the dollar overnight and fell to more than two-year lows on the euro and the Aussie.

The U.S. dollar index, which measures the dollar against a basket of six major currencies, sat at 90.351, not far above a two-week low it struck last Wednesday.

The Chinese yuan, a favored vehicle for playing the dollar’s weakness in Asia, was on the brink of strengthening past 6.4 per dollar for the first time since mid-2018 and last stood at 6.4033 in offshore trade.

The risk-sensitive Australian dollar held near Monday’s one-month high at $0.7785.

“The dollar tends to underperform when you see this broad positive sentiment in markets,” said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

“There are also inflationary pressures particularly coming from energy prices,” he said, which is pushing up nominal yields — adding another weight on the yen as that can attract flows from Japan — but keeping real returns on Treasuries steady.

Bitcoin hovered just short of $50,000 as profit taking paused the cryptocurrency’s steep rally that has carried it more than 60% higher in 2021 so far.

The yield on benchmark ten-year U.S. Treasuries <US10YT=RR> leapt five basis points to 1.2501% in early Asia trade on Monday, while most major currencies were steady.

Sterling, which broke past $1.39 for the first time in almost three years on Monday, held at $1.3912. It also held steady at 87.15 pence per euro, its highest since May 2020.

Sterling has gained as much as 2.5% on the dollar in less than two weeks as the aggressive rollout of Britain’s COVID-19 vaccination programme has raised expectations its economy will be able to recover more swiftly than European peers’.

The euro was steady at $1.2132 on Tuesday while the yen, which has dropped 2% so far this year, nursed losses at 105.36 per dollar. The yen also hit its lowest since late 2018 against the euro and the Australian dollar and hit a three-year low on the Swiss franc.

“The yen has been the worst performing currency of 2021, with its negative correlation to U.S. Treasury yields proving to be the biggest dampening factor,” said Francesco Pesole, currency strategist at Dutch bank ING in a note to clients.

“When adding weak safe-haven demand as the global recovery gathers pace, some additional trimming of yen net long positions may be on the cards.”

Ahead on Tuesday, investors are looking to eurozone growth estimates, a German sentiment survey and U.S. manufacturing data to gauge the relative pace of the world’s pandemic recovery.

The dollar started the week pinned near two-week lows on Monday as traders questioned whether the recovery from the pandemic in the United States would be as fast as expected.

Bitcoin remained volatile, retreating to as low as $45,914.75 a day after reaching a record $49,714.66.

The world’s most popular cryptocurrency had rallied 25% last week, driven by endorsements from Tesla and BNY Mellon.

The dollar index slipped 0.1% to 90.336, close to last week’s low of 90.249 — a level unseen since Jan. 27.

The gauge hit a two-month top of 91.6 on Feb. 5 on hopes that a U.S. rebound would outpace other major economies, but has since pulled back amid disappointing employment data.

“Now the market is looking for actual evidence that the U.S. economy is outperforming,” said Shinichiro Kadota, senior currency strategist at Barclays Capital in Tokyo.

“The economic data needs to improve.”

The euro edged 0.1% higher to $1.21315, extending last week’s 0.6% advance.

The dollar rose 0.1% to 105.04 yen, recovering some of the previous week’s 0.4% loss.

Many financial markets in Asia remained closed on Monday for Lunar New Year, with the United States also out for Presidents Day.

Riskier currencies gained against the greenback, with the Australian dollar adding 0.3% to 77.795 U.S. cents after earlier touching a one-month high of 77.85.

The British pound appreciated 0.3% to $1.3895 after renewing an almost-three-year high at $1.3901.

The Chinese yuan reached its strongest level since June 2018 at 6.4012 per dollar in the offshore market.

In cryptocurrencies, bitcoin last traded 3.7% lower at $46,852.

Rival virtual coin ethereum, which often trades in tandem with bitcoin, slumped 4.3% to $1,725. It reached a record high of $1,874.98 on Saturday.

The dollar dropped to two-week lows on Wednesday in choppy trading, led by losses against sterling and the euro, weighed down by U.S. data showing tepid inflation and a slippage in Treasury yields.

U.S. benchmark 10-year yields were last at 1.136%, down 2 basis points from Monday’s level. The dollar extended losses after data showed U.S. underlying inflation remained benign. Excluding the volatile food and energy components, the CPI was unchanged for a second straight month. Tame inflation data made it more likely the Federal Reserve would keep interest rates ultra-low.

“The momentum for the dollar right now has turned a little bit lower,” said Erik Nelson, macro strategist at Wells Fargo in New York.

“We’re not ready to throw in the towel on our view of a short-term bullish trend for the dollar. But our conviction on that view has lessened a bit. It seems that there has been a perceptible shift toward momentum.” The dollar index drifted to a two-week low of 90.36, and set for a third day of losses. It last traded 0.2% lower at 90.324.

Traditionally viewed as a safe-haven, the dollar has sunk against major peers as optimism over monetary and fiscal support, robust corporate earnings and coronavirus vaccines bolstered risk sentiment.

Bitcoin, meanwhile, consolidated recent gains on Wednesday, trading 3.7% lower at $44,799. It hit a new high of $48,216 on Tuesday following Tesla’s disclosure of a $1.5 billion investment in the virtual currency.
Rival virtual currency ethereum, which often moves in tandem with bitcoin, reached a record $1,839 on Wednesday before pulling back slightly. It was last down 3.8% at $1,706.

Sweden’s crown strengthened to a one-month high of 10.0406 crowns per euro ahead of the central bank’s interest rate decision, then pared some of those gains after the bank kept monetary policy unchanged as expected. Foreign exchange traders have been waging a tug-of-war over the impact on the dollar of U.S. President Joe Biden’s planned $1.9 trillion fiscal stimulus package.

On one hand, it is expected to speed a U.S. economic recovery, bolstering the currency. But on the other, it could heat up inflation which would lift riskier assets at the dollar’s expense.

After a strong start to the year for the greenback, the latter view appears to be regaining sway, with last week’s U.S. jobs data providing the turning point, according to Westpac analysts.

The dollar gained 0.1% against the yen to 104.67 yen. The Japanese currency earlier hit its highest against the greenback since Jan. 29.

The euro edged up to $1.2132, adding to a three-day gain and hitting its highest since the start of February. The British pound set fresh three-year highs of $1.3865 and was last up 0.3% at $1.3847.

The dollar languished near its lowest in a week on Tuesday as investors began entertaining doubts about the scale of a recent rally driven by expectations of a faster pandemic recovery in the United States than elsewhere.

The spotlight remained on bitcoin as it reached a record above $47,000, building on a nearly 20% surge overnight that was the biggest since 2017, after Tesla Inc announced a $1.5 billion investment in the digital asset.

The dollar index against a basket of major currencies has vacillated around 91 since disappointing U.S. jobs data on Friday knocked the wind out of a two-week run that had lifted it to a more than two-month high of 91.6. It last traded at 90.935.

Investors had pushed up the greenback thanks to a faster U.S. vaccine rollout relative to most other countries, and as Democrats moved to fast-track President Joe Biden’s $1.9 trillion COVID-19 relief package.

Many analysts, though, see that massive fiscal spending coupled with continued ultra-easy Federal Reserve monetary policy dragging down the dollar in the longer term.

“The bottom line is a large stimulus is highly likely to pass soon, exacerbating the widening in the U.S. current account deficit, and weighing on the USD,” Commonwealth Bank of Australia currency analyst Joseph Capurso said in a client note.

Europe’s “lagging” vaccination program will cap the euro near-term but the continent should catch up by the summer, after which the single currency could rally to $1.28 for the first time since 2014, he said.

The euro was little changed at $1.2055 in early Asian trading on Tuesday, up from the two-month low of $1.9520 touched Friday.

The dollar was mostly flat at 105.21 yen, after climbing to 105.765 at the end of last week for the first time since October.

Elsewhere, Tesla sent bitcoin surging by saying in its 2020 annual report on Monday that it had bought $1.5 billion of the world’s most popular cryptocurrency as part of its broad investment policy, and that it expected to begin accepting the digital asset as payment for its products “in the near future.”

“This is a turning point for how we view digital currencies,” said Junichi Ishikawa, a foreign-exchange strategist at IG Securities in Tokyo.

“From here on, bitcoin will be genuinely considered as an asset available for selection by asset managers in their portfolios.”

Bitcoin traded at $47,073 after pushing to a new record at $47,565.86 on Tuesday.

Rival coin ethereum changed hands at $1,746.50 after reaching an unprecedented $1,784.85 on Monday.

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