Dollar down, but still in holiday-thinned trading

Published On: December 29, 2021Categories: Latest News1.3 min read

The US Dollar Index that tracks the greenback against a basket of other currencies edged down 0.04% to 96.165

The dollar was down on Wednesday morning in Asia, but was still in holiday-thinned trading, and investors struggled to grasp its direction.

The US Dollar Index that tracks the greenback against a basket of other currencies edged down 0.04% to 96.165 by 3:46 AM GMT. The euro inched down 0.14% overnight to $1.1307 and the pound retreated from a five-week high, helping to take the index, to 96.165 from as low as 95.958 on Friday.

The dollar was also supported by climbing two-year Treasury yields, which hit a near two-year high on Tuesday.

The USD/JPY pair stabilized at 114.81.

The AUD/USD pair edged down 0.03% to 0.7226 and the NZD/USD pair edged down 0.07% to 0.6807.

The USD/CNY pair edged up 0.05% to 6.3718 as investors continue to digest that People’s Bank of China reiterated that the yuan exchange rate will be more flexible in 2022 and will remain stable overall.

The GBP/USD pair stabilized at 1.3434.

Some investors warned that it is still hard to read the real direction from the dollar’s moves as many traders are off for the holidays.

Things are mostly noise right now, though we are probably seeing a soft risk-on/risk-off dynamic going on with stocks down slightly, and the dollar has caught a bid on the inverse of that, IG Markets analyst Kyle Rodda told Reuters.

However, Rodda remained bullish on the U.S. currency longer term, due to imminent interest rate hikes by the U.S. Federal Reserve and the reduced chance of future lockdowns in the U.S.

Expectations that the Fed will begin hiking interest rates before other major central banks, such as the European Central Bank (ECB), boosted the dollar index to its best year in 2021 since 2015.

About the Author: Jonathan Adams

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