U.S. dollar declines due to interest rate hike worries fading, waiting for Fed meeting minutes Reuters

Ritvik Carvalho

LONDON (Reuters)-The U.S. dollar fell against a basket of major currencies on Monday after the US employment data last week was mixed, alleviating investor concerns that monetary stimulus measures will end sooner.

Although the overall job creation data for June was better than expected, the unemployment rate rose and the labor force participation rate did not fall-indicating positive progress, but the Fed has room to wait before reducing asset purchases or raising interest rates.

After the data was released, bonds rose, the stock market rose, and the US dollar fell-the risk-sensitive Australian and New Zealand dollars and the interest rate-sensitive Japanese yen fell the most.

Although it tried to rebound in early trading in Asia and Europe, by midday in London, the dollar had fallen back to its lowest level since Wednesday.

The yen rose by about 0.2% against the yen to 0.7022 US dollars, fell 0.05% to 110.94 yen, and finally remained unchanged at 1.1863 US dollars per euro.

The US market is closed on Monday for the Independence Day holiday.

ING strategists said in a report to clients: “Friday’s non-agricultural employment report provides everyone with a higher-than-expected non-agricultural employment growth and a higher-than-expected unemployment rate.”

“The U.S. interest rate market’s stance on the Fed’s early tightening policy has softened slightly, and the U.S. dollar closed slightly weaker. Today’s U.S. public holiday indicates that today’s trading will be quiet, although the Fed’s story will reappear when investors read the meeting minutes on Wednesday night The key FOMC (Federal Open Market Committee) meeting on the 16th.”

It finally fell 0.1% to 92.262, which was lower than Friday’s level. But since the Fed unexpectedly raised interest rates by 2% in the three weeks since the Fed raised interest rates in 2023, analysts believe that the U.S. dollar has room for further gains.

Analysts from Maybank Singapore stated in a research report: “Since the Fed took a tough stance in June, the U.S. dollar has become more and more sensitive to the strength of domestic data, and some developed and emerging market counterparts are still fighting the COVID-19 outbreak. Fight.”

“Therefore, this dollar strength may continue for a period of time, and the optimistic risk environment at this time may not be completely detrimental to the dollar.”

In other respects, the British pound rose 0.2% to US$1.3860, and Asian emerging market currencies rose slightly to catch up with the US dollar’s ​​fall on Friday. [EMRG/FRX]

minute

The focus of traders this week is the minutes of the Fed’s June meeting (to be announced on Wednesday) and the minutes of the RBA meeting. In the context of uncertainty about the policy outlook, these two meetings are likely to change the currency from the range of a few months. Boost in the transaction.

“More information about when the FOMC can reduce the size of asset purchases can boost US interest rates and the dollar,” said Commonwealth Bank of Australia (OTC:) analyst Joe Capurso, referring to the Federal Open Market Committee, which sets interest rates.

“Therefore, it can further prove that the FOMC’s inflation outlook is changing. In particular, analysts will look for signs that the FOMC’s surge in inflation will be a temporary decline in confidence,” he said. “In other words, the FOMC’s tolerance for inflation overshoot is weakening.”

This week’s upcoming Reserve Bank of Australia (RBA) meeting will be held on Tuesday, which has made the market nervous as the central bank has made a decision on the fate of its bond purchase plan and yield target.

The cash rate may not change, but economists expect that the three-year yield target will remain at the April 2024 bond – it will not be extended to the November 2024 bond quota, and the Bank of Australia will adopt a flexible Bond purchase method.

“Despite the strong terms of trade, the Reserve Bank of Australia’s policies have successfully suppressed the strength of the Australian dollar; but as the underestimation approaches historical extremes, the dovish accident may have less impact on foreign exchange,” BoFA Global Research analysts said in a report .

Cryptocurrencies were offered on Monday. Bitcoin was below its 20-day moving average of $33,737 and Ethereum fell 4% to $2,229.