You are here: Home » International » News » Markets
Business Standard

US Dollar rises towards 20-year high, euro dips after weak data

Markets are pricing in an aggressive run of rate hikes from the Fed as it tries to tame soaring inflation

Topics
Euro | US Dollar

Reuters  |  London 

Euro, Dollar

The dollar rose back towards a 20-year high on Monday as the struggled around the $1.05 mark, with investors preparing for a busy week of central bank meetings including a likely Federal Reserve interest rate hike.

The also came under pressure after a survey showed that zone manufacturing output growth stalled last month as factories struggled to source raw materials, while demand took a knock from steep price increases.

in Asia and London were closed for public holidays, so trading was quiet.

Investors are expecting the Fed to hike rates by 50 basis points when it meets on Tuesday and Wednesday. The uncertainty is around how hawkish Fed Chair Jerome Powell will sound in comments following the decision.

are pricing in an aggressive run of rate hikes from the Fed as it tries to tame soaring inflation.

That, together with an expected slower rate of European Central Bank tightening and worries about the impact of the war in Ukraine on the euro zone economy, has sent investors scrambling for dollars and left the euro at five-year lows.

The dollar index gained 5% in April, its best monthly performance since January 2015.

"We expect the USD to stay strong versus the EUR, as a hawkish FOMC (Federal Open Market Committee) stance and geopolitical concerns will support the USD," UBS Global Wealth Management wrote in a research note.

"Short-term investors may look to sell rallies in EURUSD above $1.08."

The wealth manager has lowered its euro/dollar forecasts to $1.05 for June from a previous $1.11, $1.06 for September, $1.08 for December and $1.10 for March 2023.

The dollar index was last at 103.36, up 0.1% on the day. The euro lost 0.2% to $1.0525.

BNP Paribas strategists said last week that big speculative flows and not concerns about a worsening economic outlook explained the euro's slide to a five-year low below $1.05 this week.

YUAN UNDER PRESSURE

Elsewhere, the dollar gained half a percent on the Chinese yuan in offshore markets, reaching 6.6895, just below its strongest since late 2020.

Sterling slipped 0.1% to $1.2570, while Japan's yen was down against the dollar at 129.91 but off recent lows.

Other central bank meetings this week include the Bank of England on Thursday, which is expected to raise rates by 25 basis points to 1%.

Steve Englander, head of global G10 FX Research at Standard Chartered, said there was a reasonable case to be made for central bank intervention to weaken the surging dollar.

But in the absence of policymakers outside the United States turning more hawkish, intervention would not have a big impact, he added.

"We doubt intervention would have a sustained impact until the ECB and BoJ (Bank of Japan) offer more policy rate support," he said.

The Australian and New Zealand dollars initially fell sharply in Asian hours as a sell-off on Wall Street undermined risk appetite and overshadowed the prospect of higher interest rates at home.

The Aussie bounced off three-month lows in European hours and was last at $0.7074, unchanged on the day.

The Australian dollar shed 5.7% last month as European recessionary fears and lockdowns in China undermined risk assets.

The Kiwi dollar hit its lowest since mid-2020 at $0.6422, having lost 6.9% in April, before recovering to $0.6448.

 

(Reporting by Tommy Wilkes; Editing by Emelia Sithole-Matarise and Jan Harvey)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, May 02 2022. 17:33 IST
RECOMMENDED FOR YOU
.