Rising dollar suspends respite before European Central Bank Reuters


© Reuters. File photo: One dollar and five pounds can be seen in this illustration taken on May 7, 2021. REUTERS/Dado Ruvic/Illustration

Author: Tom Westbrook

SINGAPORE (Reuters)-The U.S. dollar took a breather from its high on Wednesday. As the risk aversion faded, it fell slightly from its multi-month high. However, the European Central Bank’s expectations of the European Central Bank’s cautious actions weighed on the euro, so the sell-off was weak.

The euro hit a new three-month low of $1.1755 overnight, and its slight rebound only hit $1.1780 in early Asian session.

The Australian and New Zealand dollars have also risen from year-to-date lows, while the British pound has recovered from a five-month low.

But these measures have hardly weakened the one-month gain of the US dollar, even if the Canadian dollar rose 0.5% overnight, it kept it below the 200-day moving average. ()/

“The U.S. dollar does seem to have a lot of support,” Westpac analyst Sean Callow said in Sydney.

He said that the rise in the dollar was mainly driven by expectations that the strength of the US economy might increase interest rates, but it has recently been helped by risk aversion.

He added: “From now to the Jackson Hole meeting, the overall sentiment of the dollar seems to take a lot of time to destroy the basic narrative that the dollar is in a pretty good state,” he was referring to the seminar held in Wyoming in August, where The Federal Reserve may announce a reduction in its bond purchases.

“For now, you may be more willing to hold long U.S. dollars in the next few weeks.”

Analysts said that the latest exchange rate is at 92.971, up 2.8% since mid-June, and it seems to be ready to test its March high of 93.439.

The U.S. dollar also rose slightly against the safe-haven Yen, buying 109.96 Yen. Earlier, new global concerns about new coronavirus cases prompted investors to switch to safer assets, which fell to 109.07 Yen this Monday.

With the implementation of new lockdown measures from Seoul to Sydney, viral infections, especially the infectious Delta variant, continue to drag Asian currencies other than the yen.

The pound is also under pressure because of the surge in COVID-19 cases and the removal of most social restrictions in England. It is believed that vaccines will prevent hospitals from being overwhelmed. [GBP/]

The pound was last reported at 1.3631, deviating from the five-month low of 1.3576 hit on Tuesday, but below its 20-day and 200-day moving averages.

The Australian dollar against the U.S. dollar traded at $0.7319 after hitting $0.7300 overnight, falling from a low of $0.6882 to $0.6916. The Canadian dollar to US dollar exchange rate is 1.2687 Canadian dollars.

Wednesday’s data calendar is light, and traders look forward to Thursday’s ECB meeting. In an interview last week, President Christine Lagarde (Christine Lagarde) heralded the adjustment of the guidelines, which is expected to have a moderate tone.

The European Central Bank announced a new strategy that allows the bank to tolerate inflation above its 2% target. Lagarde said it will review policy guidance to prove the bank’s commitment to the new target.

ING analysts said in a report: “No change in the ECB’s bias is unlikely to be enough to push up the euro.” “At the same time, any change in the ECB’s dovish interpretation of the strategy evaluation will highlight the recent euro/ The downward trend of the dollar.”

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