Dollar lower, but set for best weekly gain in a month

by Jonathan Adams
Dollar lower

The greenback is set for its best weekly gain in nearly a month as concerns about a quicker-than-expected U.S. interest rate hike capped losses

The dollar was lower on Friday morning in Asia. However, the greenback is set for its best weekly gain in nearly a month as concerns about a quicker-than-expected U.S. interest rate hike and rising cases of the delta variant of the coronavirus capped losses.

The U.S. Dollar Index dropped 0.06% to 92.575 by 3:46 AM GMT.

The USD/JPY pair rose 0.09% to 109.95. The Bank of Japan (BOJ) concluded a two-day meeting earlier in the day, where it left its yield curve control (YCC) target unchanged at -0.1% for short-term interest rates and 0% for 10-year bond yields. BOJ also cut the current fiscal year’s growth forecast while maintaining that the economy was headed for a moderate recovery.

The AUD/USD pair rose 0.15% to 0.7438, but the lockdown in Australia’s biggest cities of Melbourne and Sydney weighed on the Australian dollar.

In New Zealand, the NZD/USD pair added 0.57% to 0.7020.

The USD/CNY pair inched up 0.13% to 6.4655, while the GBP/USD pair edged up 0.07% to 13838, with the U.K. set to lift most of its remaining COVID-19 restrictions on Jul. 19.

New Zealand’s consumer price index (CPI) for the second quarter was higher than expected, growing 3.3% year-on-year and 1.3% quarter-on-quarter, a decade high. The New Zealand dollar was among the biggest mover amongst majors in the morning trade after the data’s release.

Investors are now pricing an 86% chance that the Reserve Bank of New Zealand (RBNZ) will hike interest rates in August, earlier than expected. This will make it the first developed-market central bank to exit from emergency policy settings should it do so.

However, a firm greenback meant that the New Zealand dollar remained within recent ranges.

Clearly the U.S. dollar has got some power behind it, and I think that’s holding back all the majors. There’s an interest rate side to it, and sometimes it’s a safe-haven bid. We do feel that the dollar’s going to be quite strong over the next few months, Westpac strategist Imre Speizer told Reuters.

With Speizer adding that recent U.S. data fed into higher yields and rate-increase expectations, investors now await data on June core retail sales as well as the Michigan consumer sentiment and expectations indexes, due later in the day.

The Thai baht, which was one of the currencies most battered by the recent COVID-19 outbreaks, was set for a fifth consecutive weekly loss as the country posted a record number of daily cases.

This article is for information purposes only.
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