Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Dollar dips after Fed rally, Bitcoin slumps

EconomyJun 21, 2021 20:55
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: U.S. one dollar banknotes are seen in front of displayed stock graph in this illustration taken February 8, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) - The dollar retreated from two-month highs on Monday as investors evaluated whether a perceived hawkish tilt by the Federal Reserve last week will mark a pause in the dollar bear trend that has been in play since March 2020.

The dollar has surged since the U.S. central bank on Wednesday said that policymakers are forecasting two rate hikes in 2023. That led investors to re-evaluate bets that the U.S. central bank will let inflation run at higher levels for a longer time before hiking rates.

The greenback dropped on Monday but held above where it traded before the Fed's statement on Wednesday.

"There was a rush to clean out outstanding positions that were a little bit maybe too skewed towards dollar shorts," said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto. Now, "the market's trying to catch its breath a little bit before it really decides whether or not to extrapolate this trend towards a stronger dollar."

The dollar had weakened on expectations that the Fed will hold rates near zero for years to come even as the economy rebounds from COVID-19 pandemic-related shutdowns.

Two regional Federal Reserve officials said on Monday that a faster withdrawal from the central bank's bond purchase program could give it more leeway in deciding when to raise interest rates.

New York Fed President John Williams (NYSE:WMB) also said that more progress is needed before the Fed should begin to scale back some of its economic support.

Comments by Fed Chair Jerome Powell will be in focus on Tuesday to see if he confirms the hawkish outlook or tries to row back market expectations of faster tightening.

Powell said last week there had been initial discussions about when to pull back on the Fed's $120 billion in monthly bond purchases, a conversation that would be completed in coming months as the economy continues to heal.

The dollar index against a basket of currencies fell 0.44% on the day to 91.849. The euro gained 0.41% to $1.1917 and the greenback gained 0.03% to 110.29 Japanese yen.

The British pound gained 1.03% to $1.3933.

Some analysts say the recent market moves have been exaggerated by investors unwinding crowded trades, and that the dollar still faces weakening pressures as the global economy recovers.

"The core thesis underpinning our USD weakness view has not changed drastically," Wells Fargo (NYSE:WFC) analysts said on Monday in a report.

"For one, the global economic recovery is still gathering pace and broadening in scope. Moreover, while the Fed's dots sent a hawkish signal, Chair Powell continued to talk down the risks of a near-term taper. In any case the Fed still looks likely to lag many of its G10 peers in reducing accommodation," they said.

Producer price inflation data on Friday will also be in focus for any signals that price pressures may stay higher for longer, which could prompt sooner-than-expected Fed tightening.

"If inflation data comes in a little bit firmer than expected, or is a little bit stickier than expected, then that could portend to more aggressive timelines for the Fed to remove accommodation," Rai said.

In cryptocurrencies, bitcoin's poor recent run continued with a 8.89% drop to $32,390, as China expanded restrictions on mining to the province of Sichuan.

Cryptomining in China accounts for more than half of global bitcoin production.

Dollar dips after Fed rally, Bitcoin slumps
 

Related Articles

Hard-won gains at risk as Delta variant spreads- WHO
Hard-won gains at risk as Delta variant spreads- WHO By Reuters - Jul 30, 2021

By Stephanie Nebehay and Michael Shields GENEVA (Reuters) -The world is at risk of losing hard-won gains in fighting COVID-19 as the highly transmissible Delta variant spreads,...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email