Dollar climbs lower on bets US reduction remains distant
By Stanley White
TOKYO (Reuters) – The dollar fell slightly on Monday amid speculation that U.S. Federal Reserve Chairman Jerome Powell will avoid talking about cutting bond purchases at a policy meeting this week.
The euro hit a near two-month high against the greenback before data on Monday predicted improving sentiment for German businesses, which would bolster hopes for a brighter economic outlook.
Powell will likely have to ask himself whether improving labor market and rising coronavirus vaccinations justify the withdrawal of monetary easing, but most analysts expect him to say such talk is premature, which would put downward pressure on Treasury yields and the dollar.
“The dollar is expected to continue to decline in line with the growing strength of the global economy,” analysts at the Commonwealth Bank of Australia wrote in a research note.
“We expect the Fed policy meeting to be a non-event for the dollar. The US economy is far from reaching the threshold of ‘substantial progress’ for the Fed to reduce its asset purchases.
The dollar settled at 107.75 yen, close to its lowest since March 4.
The euro rose to $ 1.2110, adding to gains made on Friday after positive data on European services and manufacturing activity.
A survey by the German Ifo institute, scheduled for later Monday, is expected to show that business conditions have continued to improve in Europe’s largest economy.
The British pound was listed at $ 1.3897, adding to a 0.3% gain in the previous session.
The dollar was little changed at 0.9128 Swiss francs, close to a two-month low.
The Fed’s next meeting ends Wednesday, and while no major policy changes are expected, investors will pay close attention to Powell’s comments after the meeting.
Rising coronavirus vaccination rates and improving economic outlook are reasons for optimism, but many traders and analysts say Powell is likely to reiterate his commitment to keeping easy policy in place for an extended period. .
U.S. funds recently sold the dollar against the yen in Asian trading, which is a further sign that major investors expect lower U.S. Treasury yields to push the dollar lower, said. some traders in Tokyo.
In emerging markets, traders are watching the Turkish lira to see if it will test its all-time low of 8.58 per dollar amid deteriorating relations with the United States and concerns about an accommodating central bank governor. The lira was last listed at 8.4285.
The onshore yuan edged up to 6.4866 to the dollar, just short of a six-week high.
Elsewhere, the Australian and New Zealand dollars hit one-month highs, but are expected to keep pace with global commodity prices, traders said.
In the cryptocurrency market, Bitcoin recovered the $ 50,000 mark and little rival Ether rose, recouping some of their losses from last week triggered by US President Joe Biden’s plan to raise taxes on capital gains for wealthy investors.
(Reporting by Stanley White; editing by Richard Pullin)