This Wednesdaythe dollar continues its rise and is heading for its biggest monthly gain since September, while the yen was heading for its biggest monthly drop in almost a year, all waiting for the decision on interest rates in the United States to close the month of January.
The dollar index is up 2.1% this month against a basket of six major currencies. This boost is attributed to reduced expectations about the speed and magnitude of rate cuts in the United States, backed by solid economic data and optimistic comments from central bankers.
Today, the dollar index registered a modest increase of 0.1%, standing at 103.51, slightly below the 103.82 on Monday, which equaled the seven-week high reached last week.
Dollar vs. other currencies
On the other hand, the yen records a significant drop of 4.5% against the dollar this month, marking its largest monthly decline since February of last year.
This is due to subdued wage data and slowing inflation, allowing the Bank of Japan to take its time in considering raising rates. Howevero, a summary of the Japanese central bank’s January meeting showed strengthened resolve and conditions supporting an end to negative rates in the near future.
As for the United States, the Federal Reserve is expected to keep interest rates stable this Wednesday, but with signs of possible cuts, leaving aside the part of the statement that suggests further increases. Interest rate futures indicate a 43% chance of a cut in Marchdeclining from 73% at the beginning of the year.
Additionally, German inflation figures will be published on Wednesday, while French inflation harmonized with the EU moderated to 3.4% in January from 4.1% in December. A slowdown in Germany could be a harbinger of euro zone figures due out on Thursday, strengthening expectations of rate cuts sooner than the ECB has signaled.
The euro and the pound sterling show declines of 0.2%, settling at $1.0829 and $1.2680 respectively, ahead of the Bank of England’s monetary policy announcement scheduled for Thursday.
Meanwhile, the yuan operates at 7.1771 units per dollar on Wednesday, accumulating a drop of 1% for the month. China’s manufacturing activity contracted for the fourth straight month in January, an official survey showed, indicating the sector faces challenges in regaining momentum.
Source: Ambito
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