He global dollar halted its recent decline against most other benchmark currencies on Monday as investors weighed the prospect of the United States Federal Reserve (Fed) soon begin a series of interest rate cuts. However, it fell to a three-week low against the yen.
He dollar indexThe U.S. dollar, which measures the greenback’s value against a basket of six major currencies, rose to 100.82, moving away from a 13-month low of 100.60 hit late last week.
The pound sterling fell 0.2% to $1.3190 after hitting as high as $1.32295 on Friday for the first time in 17 months. Trading activity was expected to be lighter than usual as markets in the United Kingdom were closed for a public holiday.
He euro fell 0.2% to $1.1167, but not far from its session high of $1.1205, a level last seen in July last year. Sources told Reuters that authorities in the European Central Bank (ECB) are supporting another rate cut on September 12.
He Swiss Franc rose to 0.8475 per dollar, its highest level since August 5.
On the other hand, the Australian dollar fell 0.4% to $0.6768, but remained not far from Friday’s high of $0.6799, the highest level since July 11.
The yen remains firm
He dollar fell 0.7 percent to 143.45 yen, its lowest level since Aug. 5, and was last trading down 0.2 percent.
To help strengthen the yen, the head of the Bank of Japan (BoJ), Kazuo Uedareaffirmed on Friday its determination to raise interest rates if the inflation remains on course to sustainably achieve the 2% target.
Many market participants had expected Ueda to strike a less hawkish tone at a special session of the Parliamentwhich was called amid criticism that the BOJ’s surprise rate hike last month helped trigger a rapid unwinding of bearish bets on the yen and aggressive selling of Japanese stocks.
The Middle East and the Fed cut
Traders were also keeping an eye on the fallout from rising tensions in Middle East which raised oil prices by almost 3%.
In a highly anticipated speech at the annual economic conference in Jackson Hole, Wyoming, the president of the Fed, Jerome Powell, He said that “the time has come to tighten policy,” prompting traders to seal their bets on a 25 basis point (bp) rate cut in September and even raise their expectations for a large 50 bp rate cut.
“He didn’t say anything new, but he officially validated some of the things that markets were pricing in, including the idea of a cut, a shift in focus from inflation to labor market“said Samy Chaar, chief economist at Lombard Odier in Geneva.
However, he does not believe that the dollar fall much further in the near term. “A massive weakness in the dollar from now on would mean that the market is not pricing in enough cuts, which I think is a bit of a stretch,” he added.
Source: Ambito
