Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Dollar eases as traders scale back bets on Fed tightening

Economy May 26, 2022 20:56
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. REUTERS/Dado Ruvic/File Photo

By John McCrank

NEW YORK (Reuters) - The U.S. dollar edged lower on Thursday as markets considered whether the Federal Reserve might slow or even pause its tightening cycle in the second half of the year, which would weaken the allure of the safehaven currency.

{{2126|The dodollar index, which measures the greenback against a basket of six major peers, was down 0.206% at 101.84 at 3 p.m. ET (1900 GMT).

The currency began to weaken after minutes from the Fed's May meeting, released Wednesday, showed that most participants judged that 50 basis-point hikes would likely be appropriate at the June and July policy meetings to combat inflation that they agreed had become a key threat to the economy's performance.

Many of the participants believed that getting rate hikes in the books quickly would leave the central bank well positioned later this year to assess the effects of policy firming, the minutes showed.

"The market is becoming a little bit more optimistic that the Fed won't be too aggressive with tightening and that some of the sell-off that we’ve seen with risky assets, specifically equities, might have been overdone, said Ed Moya, senior market analyst at Oanda.

"That's prompting a little bit of a rally here for risky assets, which is really nice for the risk trade, which in essence, is bad for the dollar," he said.

The dollar index reached a nearly two-decade peak above 105 earlier this month but signs that aggressive Fed action may already be slowing economic growth have prompted traders to scale back tightening bets, with Treasury yields also dropping from multi-year highs.

"While it is not the base case view of our Economics team ... we think the Fed might make the case that reaching 1.75%-2% provides a normalization of policy which then offers an opportunity to pause and assess the impact on jobs and inflation," strategists at JP Morgan said in a client note.

The implied yield on the eurodollar futures June 2023 contract -- essentially where markets see interest rates to be at that point -- is down some 80 basis points this month.

"The dollar at this point is range-bound," said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

Data on Thursday confirmed the U.S. economy contracted in the first quarter under the weight of a record trade deficit and a slightly slower pace of inventory accumulation compared to the fourth quarter.

A separate report showed number of Americans filing new claims for unemployment benefits fell last week, signaling continued tightness in the labor market.

Elsewhere, the euro rose 0.37% to $1.0719, while the dollar edged down 0.011% against the Japanese yen to 127.155 yen.

Risk-correlated currencies were mixed, with the Australian dollar up 0.08% at $0.7093 and New Zealand dollar down 0.08% at $0.6473.

Sterling briefly rose to a three-week high of $1.26165 ahead of an expected announcement from British Chancellor Rishi Sunak on a package of measures to help consumers cope with rising energy bills.

The pound was last up 0.1% at $1.2596.

In cryptocurrencies, bitcoin was last trading 0.17% lower at $29,459, while smaller rival ether was down 4.68% at $1850.

Dollar eases as traders scale back bets on Fed tightening
 

Related Articles

SAS and its pilots extend wage talks until Monday
SAS and its pilots extend wage talks until Monday By Reuters - Jul 02, 2022

STOCKHOLM (Reuters) -Scandinavian airline SAS and its pilots have agreed to extend their wage talks until Monday in the hope of averting a strike, a company executive told...

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
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email