The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.05% to 90.097
The dollar fell on Tuesday morning in Asia, hitting a six-year low against Canadian dollar and hovering near multi-month lows against European currencies, as investors ramped up bets that the U.S. Federal Reserve would not hike interest rates anytime soon.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.05% to 90.097 at 4:20 AM GMT.
The USD/JPY pair inched up 0.03% to 109.22, with Japan’s slow COVID-19 vaccination rate and dollar weakness locking the duo into a narrow range.
The yen also dropped against the pound and the riskier Antipodean currencies as data released earlier in the day said that the Japanese economy contracted more than expected during Q1 2021, as its Gross Domestic Product (GDP) contracted 5.1% year-on-year (YOY) and 1.3% quarter-on-quarter.
The AUD/USD pair rose 0.35% to 0.7791, with the Reserve Bank of Australia releasing the minutes from its latest meeting earlier in the day. The NZD/USD pair advanced 0.47% to 0.7234.
The USD/CNY pair inched down 0.17% to 6.4278, with the onshore yuan close to the almost three-year high reached during the previous week.
The GBP/USD pair rose 0.27% to 1.4173, its strongest level since late February 2021, as the U.K. starts to exit its COVID-19 lockdown.
The dollar was at $1.2167 against the euro, near its weakest level since Feb. 26, 2021. The Canadian dollar jumped to a six-year high of C$1.2045 against the U.S. dollar, bolstered by a rise in oil prices.
Dallas Fed President Robert Kaplan on Monday reiterated his view that he does not expect interest rates to rise until 2022, thus sparking a further decline in bets that inflationary pressure could force the central bank to act sooner than expected.
Other Fed officials are due to speak throughout the week and investors also await the release of the minutes from the Fed’s latest meeting, due on Wednesday.
Investors will analyze the minutes once they are released for clues as to the Fed’s monetary policy direction for the rest of 2021. However, there is a growing consensus that the Fed will continue with its current dovish policy over the assumption that any acceleration in inflation is temporary, in turn keeping the dollar on a downward trend.
The most important point is where yields are headed. Yields are capped, reflecting expectations that U.S. monetary policy will remain easy. This places the dollar under downward pressure, IG Securities senior foreign exchange strategist Junichi Ishikawa told Reuters.
With investors already scaling back bets for a Fed interest rate hike in 2021, Kaplan’s comments further incentivized them to sell the dollar.
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