2023-11-06 06:23:00
Major global currencies remained stable on Monday as investors braced for the U.S. dollar to extend declines recorded late last week following the Federal Reserve reduced its hawkish rhetoric.
The dollar index slipped 0.08% to 104.99, with the euro gaining 0.08% to $1.0738. The dollar index fell more than 1% last week, its biggest decline since mid-July, and hit its lowest level in six weeks.
Global stocks also had their strongest week in a year as expectations for an end to the Fed’s interest rate hikes intensified.
Other indicators, such as weak U.S. jobs data, falling manufacturing numbers around the world and falling yields on longer-term Treasury bonds, also hurt to the dollar, while boosting the rise of the pound sterling and the Australian dollar and rebounding the yen, which hit a record low of 150 per dollar.
“We always say bad news is good news,” said Tina Teng, market analyst at CMC Markets in Auckland. “So it’s a good thing that the Fed and other central banks expect the rate hike cycle to end sooner.
She expects the dollar’s downward trend to continue through November.
However, analysts at JPMorgan Securities were cautious.
“Dollar bears would do well to moderate their enthusiasm,” they write. “Indeed, the pillars of dollar strength have become diluted, but have not completely faded and are likely to re-emerge in the medium term as factors supporting the dollar.
Moreover, in addition to additional evidence of a slowdown in the U.S. economy, JPMorgan analysts believe that a sustained decline in the dollar requires signs of improvement in the Eurozone, China and other regions that they say , are “still tenuous”.
The latest manufacturing surveys in China and GDP and inflation data in Europe confirm this.
Treasury yields fell last week following weak U.S. jobs and manufacturing data and following Fed Chairman Jerome Powell spoke of “balanced” risks. Separately, the US government lowered its refinancing estimates for the current quarter and announced smaller-than-expected increases in long-term debt auctions.
Two-year bond yields fell 25 basis points in regarding two weeks, while ten-year bond yields remained near a five-week low and settled at 4.5891%. The front part of the curve remains deeply inverted.
Futures markets fluctuated to suggest there was a 90% chance the Fed would be done raising rates and an 86% chance the first monetary policy easing would occur as early as June.
Markets also imply a roughly 80% chance that the European Central Bank will cut rates by April, while the Bank of England is expected to ease policy in August.
The Japanese yen weakened 0.1% to trade at 149.48 per dollar. CMC Markets’ Mr. Teng said the reversal in the dollar’s direction and the yen’s recovery from last week’s low suggest that Japanese authorities probably don’t need to intervene on the currency.
The yen hit 151.74 per dollar last week, approaching the lows of last October that prompted several rounds of interventions by the Bank of Japan to sell dollars.
The pound sterling remained stable at $1.2373. UK GDP data for the fourth quarter is due this week and, although sterling rallied sharply last week in a heavily shorted market, it is still down around 6% in four months.
The decline in the dollar and yields helped support gold at $1,984, close to the recent five-month high of $2,009.
As for cryptocurrencies, bitcoin remained stable at $34,847. The risky asset was supported by the expected end of central bank policy tightening cycles.
The cryptocurrency sector has also focused on the prospect of new exchange-traded funds (ETFs) for bitcoin, which would open the market to more investors. Although none have been approved, several companies have applied for such a product.
1699252278
#dollar #falters #remains #vulnerable #Fed #decision
