Home Forex Dollar set for its worst week in a month

Dollar set for its worst week in a month

by Jonathan Adams
Dollar

The dollar index is down 1.2% for the week so far and has fallen 12.7% from a three-year peak in March

The dollar has sunk through major support levels and looked set for its worst week in a month on Friday, as its accelerating slide sucked in more short sellers keen to make an easy buck.

It has slumped to a nine-month low against the safe-haven yen, even though investors have been gobbling up risky assets all week, and fallen to multi-year lows against the euro, pound, Aussie, kiwi and Canadian dollar.

The euro has added nearly 3% in the three weeks since it burst through stiff resistance at $1.2000. At $1.2254, after minor profit taking on Friday, there is clear sky ahead until the common currency’s 2018 top of $1.2556.

The Australian dollar, which also saw some small profit taking, is set for a seventh consecutive weekly gain, a streak that has carried it 9% higher since early November.

It’s a perfect combination that is besieging the dollar at the moment, said Rodrigo Catril, National Australia Bank’s senior currency strategist in Sydney, since U.S. rates are anchored low and better returns are expected elsewhere.

For now the narrative of global growth, and broadening of the recovery, favours risk-sensitive currencies like the Aussie and the kiwi, and more of the same is to be expected in 2021, Catril said.

The New Zealand dollar, popped to a two-and-a-half year high of $0.7170 Thursday after better-than-expected national growth data, and has gained for eight weeks straight – its longest run of weekly rises in three years.

Against a basket of currencies the dollar languished at 89.862 on Friday, just above a 2-1/2-year low hit on Thursday. The dollar index is down 1.2% for the week so far and has fallen 12.7% from a three-year peak in March.

The greenback last traded at 103.28 yen after falling as far as 102.88 yen overnight.

Short positions in the dollar stood not far below nine-year highs last week and news in recent days of vaccine rollouts, progress in Brexit trade talks and U.S. stimulus negotiations has only strengthened dollar bears’ resolve.

If we get a U.S. fiscal deal and a Brexit deal before Christmas, there will be nothing stopping kiwi, ANZ analysts said in a note on Friday.

Britain and the European Union struck a downbeat tone about the likelihood of an agreement on Thursday, but investors are betting that is yet more brinkmanship and the pound sat comfortably at $1.3554 after hitting a 31-month high overnight.

Important
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Related News

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Know more