Dollar slides as investors balance positions ahead of US inflation data

US dollar and euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

Join now for FREE unlimited access to

  • The US dollar index falls to its lowest in more than a week
  • The euro hits a three-week high against the dollar
  • The yen and the Australian dollar gain the most in percentage terms in a month

NEW YORK, Sept 9 (Reuters) – The dollar fell to more than a week low on Friday as investors consolidated gains after surging against most currencies ahead of a report on the inflation in the United States which could determine the size of the Federal Reserve rate. hike at this month’s policy meeting.

During the week, the dollar index, which tracks the value of the greenback against six major peers, posted its first of four weekly declines on Friday.

“Markets are getting a bit nervous about levels, really historic levels, so the market has decided not to push dollar strength at this point and has trimmed positions,” said Greg Anderson, global head of strategy. FX, at BMO Capital Markets in New York. .

Join now for FREE unlimited access to

“The position will probably be light until the FOMC (Federal Open Market Committee) meeting. The market looked at everything overnight and decided that it was the right time to align and that this process has pushes the dollar down. But it’s not a trend reversal of dollar strength,” he added.

The greenback soared this week to a 24-year high against the yen, a 37-year high against the pound, with the dollar index hitting a more than 20-year high.

On Friday, the dollar index fell as low as 108.35 and was last down 0.5% at 108.96.

US rate futures are pricing in an 87% chance that the Fed will hike 75 basis points this month, with new US consumer price data next week likely to be closely watched.

Capital Economics expects the CPI to continue to decline slightly.

“We believe that the decline in inflation in the United States is consistent with our view that the environment remains favorable for the dollar, as it should benefit from higher real rates as the global economy slows,” he said. writes Jonathan Petersen, senior markets economist at Capital Economics. latest research note.

One of the big winners was the euro, which jumped 1.2% to a three-week high of $1.0114, a day after the European Central Bank raised its benchmark rate by 75 basis points. base (bp) unprecedented.

It was last up 0.5% at $1.0045.

Europe still faces a bleak economic outlook, with exorbitant energy prices weighing on consumers and businesses. European Union energy ministers were divided on Friday on whether to cap Russian gas prices, as they met to hammer out measures to protect citizens. Read more

Currencies perceived as riskier bets also benefited from improved market sentiment at the end of the week, reflected by gains in European and US stock markets. Read more

The pound gained 0.8% to $1.1592, after falling slightly the previous day following the death of Queen Elizabeth.

The Bank of England announced on Friday that it would delay its next monetary policy meeting by a week due to the period of royal mourning. Read more

The Japanese yen posted its best daily gain in a month, rising 1% to 142.675 yen to the dollar as it moved away from recent 24-year lows.

Bank of Japan Governor Haruhiko Kuroda said Friday that rapid moves in the yen were undesirable after a meeting with Prime Minister Fumio Kishida. Read more

The Aussie dollar also saw its best daily rise in a month, rising 1.3% against the US dollar to hit US$0.6850, also rebounding from deep lows.

Even battered cryptocurrencies advanced at the expense of the dollar, with bitcoin up more than 10% to $21,300.

================================================= =====

Bid rates for currencies at 3:31 p.m. (1931 GMT)

Join now for FREE unlimited access to

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Iain Withers, Alun John in London and Rae Wee in Singapore; Editing by Louise Heavens and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

Comments are closed.