Dollar drops on economic outlooks

Published On: February 23, 2021Categories: Trading1.7 min read

The U.S. dollar index was down 0.07% in New York, ticking up from previous lows

The U.S. dollar continued to fall against major currencies and reached multi-year lows against the British pound and the Australian dollar on Monday, as traders focused on whether coronavirus vaccinations, economic growth expectations and higher inflation could push bond yields higher.

The U.S. dollar index was last down 0.07% in mid-morning trading in New York, ticking up from earlier lows.

The dollar has been trending down since early February after a January bounce from a 7% drop in 2020.

The dollar continues to wax and wane with U.S. data that have painted a mixed picture of the world’s biggest economy, Joe Manimbo, senior market analyst at Western Union Business Solutions, said in a note on Monday.

Weakness in U.S. employment keeps undermining dollar rallies as the markets see wavering jobs data reinforcing the Federal Reserve’s commitment to keep interest rates low, Manimbo added.

The euro added 0.2% against the dollar to $1.2142 after data showed German business confidence rose more than expected in February primarily due to the country’s resilient industrial sector.

Rates between the euro and dollar will depend “on whether the U.S. economy really will be able to achieve a stronger post-lockdown boom than Europe,” Commerzbank analyst Ulrich Leuchtmann said.

The British pound was last up 0.2% to $1.4032 after reaching 1.4050, its highest level since April 2018, as Prime Minister Boris Johnson announced a way out of lockdowns amid rapid vaccinations. U.S. dollar dropped to three-year lows against the Australian dollar, which benefits from rising commodity prices. The Aussie reached $0.7908, its highest level since March 2018.

Commodity currencies and the pound are particularly strong against the dollar, and this trend looks set to continue, said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities.

Australia on Monday began its mass vaccine programme as it looked set to report no local cases for the third straight day, which gave the Aussie a boost. BTC dipped on Monday after rising to a new record high a day earlier as a sell-off in global equities curbed risk appetite and traders cited the unwinding of highly leveraged long positions in the cryptocurrency. Cryptocurrency dropped as much as 16%, dropping as low as $47,400 at one point.

About the Author: Jonathan Adams

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