The US dollar experienced a continued decline on Monday, following a significant decrease last week, after the Federal Reserve’s dovish tone and signs of moderation in US data. The dollar index fell 0.2 percent to 104.85, its lowest level in over six weeks, while the euro rose 0.2 percent to $1.0756, its highest point in seven and a half weeks.
Last week, world stocks had their strongest performance in a year, as market expectations grew that the Federal Reserve had finished raising interest rates. Other factors contributing to the dollar’s decline included weak US jobs data, softer manufacturing numbers, and a decrease in longer-term Treasury yields. These factors also caused rallies in the pound sterling and the Australian dollar, while the yen rebounded after weakening against the dollar.
Tina Teng, a market analyst at CMC Markets in Auckland, noted that the expectation for the Federal Reserve and other central banks to end their rate hike cycles sooner is considered good news. She predicted that the dollar would likely continue to trend weaker through November.
Dane Cekov, senior FX strategist at Nordea, described last week’s movements as an “overreaction,” stating that the jobs data presented a mixed bag. He suggested that although the dollar may remain somewhat weaker in the short-term, the euro-dollar rally would need additional fuel to continue.
JPMorgan analysts emphasized that a sustained sell-off of the dollar would require signs of improvement in the eurozone, China, and other regions, which are still considered uncertain. The latest manufacturing surveys from China and Europe’s GDP and inflation data support this view.
Last week, Treasury yields declined due to the softer US data, along with Fed Chair Jerome Powell’s mention of balanced risks. Additionally, the US government lowered its refinancing estimate for this quarter and announced lower increases in long-term debt auctions than anticipated.
Futures markets currently indicate a 90 percent chance that the Federal Reserve has finished raising interest rates, and an 86 percent probability that the first policy easing will occur as soon as June. There is also an implied 80 percent likelihood that the European Central Bank will cut rates by April, while the Bank of England is expected to ease in August.
The Japanese yen slipped 0.1 percent to 149.47 per dollar, with Cekov suggesting that it would likely need to reach the 155 per dollar range for the Japanese authorities to consider intervention or to verbally support the currency. Last week, the yen reached 151.74 per dollar, approaching the lows seen in October that prompted several rounds of dollar-selling intervention by the Bank of Japan.
The pound sterling rose 0.3 percent to $1.2414. This week, Britain’s GDP data for the fourth quarter will be released. While the pound rallied strongly last week in a market heavily shorting the currency, it is still down approximately 5.5 percent since its peak in July.
In the cryptocurrency market, bitcoin remained stable at $34,974. The anticipated end of central bank policy tightening cycles has buoyed this risky asset. Additionally, the crypto industry has turned its attention to the possibility of new spot bitcoin exchange-traded funds (ETFs), which would expand the market to more investors. Although none have been approved yet, several firms have submitted applications for such a product.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )