FOREX-Dollar retreats as markets rethink Fed rate bets, eye ECB hikes

US dollar banknotes are displayed in this illustration taken on February 14, 2022.

By Hannah Lang

The U.S. dollar struggled against its major rivals on Monday as easing inflation expectations prompted a reassessment of prospects for aggressive interest rate hikes, but market volatility dampened a broader decline .

Aggressive betting on higher rates boosted the dollar with the index hitting a nearly two-decade high of 105.79 earlier this month. But with some high-frequency data indicators showing economic momentum beginning to cool and a broader decline in commodity prices, investors are becoming cautious.

“It’s hard for Wall Street to confidently say there’s a bottom in place, so many traders are still looking to fade regardless of any rallies that emerge,” said senior market analyst Edward Moya. at OANDA.

Against its rivals, the dollar edged down 0.12% to 103.9. Earlier this month it hit 105.79, its highest since late 2002.

Futures pricing shows traders now expect the US Federal Reserve’s benchmark funds rate to stabilize around 3.5% from March next year, a pullback from the pricing of futures. rate which would reach approximately 4% in 2023.

“Today is a day of consolidation,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.

“I think we’re just waiting for more data, and that data will come out later this week,” he added, pointing to an expected Friday reading detailing consumer prices in the euro zone.

Meanwhile, the euro was supported by expectations that the European Central Bank will soon raise interest rates for the first time in more than a decade.

“Everyone is looking forward to that first rate hike that we’re going to get from the ECB, and I think the risks of a dovish hike are fading,” Moya said.

The euro rose 0.27% to $1.0587.

The euro led the gains against the dollar as the European Central Bank’s annual central banking forum in Sintra, Portugal, kicked off with ECB President Christine Lagarde and Federal Reserve Chairman attending. American Jerome Powell. Markets will be watching for any signs of future policy developments.

Commodity currencies came under pressure on Monday, with data showing that profits at Chinese industrial companies fell again, albeit at a slower pace, in May after a sharp decline in April.

Elsewhere, the Russian ruble weakened in the interbank market as Russia headed for its first sovereign default since the Bolshevik Revolution a century ago.

Cryptocurrencies stumbled, with the world’s largest cryptocurrency, Bitcoin, down 1.7% to $20,810.34. It fell to $17,588.88 at the start of the month.

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Bid rates for currencies at 3:26 p.m. (1926 GMT)

The description

RIC

Last

United States Close
Previous
Session

Percentage change

Cumulative percentage since the beginning of the year
To change

High bid

Low bid

dollar index

103.9000

104.0300

-0.12%

8.610%

+104.2100

+103.6600

euro dollar

$1.0587

$1.0558

+0.27%

-6.88%

+$1.0615

+$1.0550

dollar/yen

135.4450

135.2100

+0.17%

+17.66%

+135.5400

+134.5300

Euro/Yen

143.40

142.69

+0.50%

+10.04%

+143.4800

+142.0600

Dollar/Swiss

0.9562

0.9586

-0.22%

+4.85%

+0.9620

+0.9549

British pound/dollar

$1.2278

$1.2273

+0.07%

-9.19%

+$1.2332

+$1.2239

Canadian dollar

1.2878

1.2888

-0.07%

+1.86%

+1.2916

+1.2865

Australian/Dollar

$0.6925

$0.6941

-0.22%

-4.72%

+$0.6958

+$0.6906

Euro/Switzerland

1.0122

1.0113

+0.09%

-2.38%

+1.0157

+1.0104

Euro/pound sterling

0.8621

0.8601

+0.23%

+2.63%

+0.8627

+0.8578

New Zealand Dollar/Dollar

$0.6297

$0.6314

-0.29%

-8.01%

+$0.6326

+$0.6283

Dollar/Norway

9.7880

9.8545

-0.57%

+11.23%

+9.8810

+9.7740

Euro/Norway

10.3671

10.3937

-0.26%

+3.54%

+10.4415

+10.3601

Dollar/Sweden

10.0809

10.1325

-0.10%

+11.79%

+10.1422

+10.0480

Euro/Sweden

10.6734

10.6842

-0.10%

+4.29%

+10.7092

+10.6439

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