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Dollar Up, but Small Signs of Economic Recovery Limits Gains

Forex May 24, 2022 05:20
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By Gina Lee – The dollar was up on Tuesday morning in Asia. The safe-haven asset clawed back some of its overnight losses, and the yen also strengthened, as U.S. stock futures fell following a profit warning from Snapchat.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.15% to 102.06 by 12:10 AM ET (4:10 AM GMT).

The USD/JPY pair edged down 0.13% to 127.70, with the Japanese manufacturing purchasing managers’ index (PMI) for May 2022 at 53.2. Japan also released the services PMI for that month.

The AUD/USD pair was down 0.32% to 0.7084 and the NZD/USD pair was down 0.46% to 0.6437. New Zealand’s core retail sales grew 0% quarter-on-quarter in the first quarter of 2022, while retail sales contracted 0.5% quarter-on-quarter.

The USD/CNY pair edged up 0.12% to 6.6585 while the GBP/USD pair edged down 0.20% to 1.2563.

The U.S. currency clawed back its losses after Monday's 0.85% fall, which took it further from the nearly two-decade peak above 105 hit during the middle of the month. The dollar did, however, slip against the Japanese yen.

Across the Atlantic, the euro retreated 0.21% to $1.0672, although it barely dented Monday's 1.17% surge, after European Central Bank President Christine Lagarde said policymakers were likely to lift the euro area deposit rate out of negative territory by the end of September 2022.

U.S. stock futures showed a 0.81% fall for the S&P 500 and 1.41% slide for the Nasdaq at the restart, taking the shine off a strong session on Monday that saw the indexes climb 1.86% and 1.68% respectively. An after-the-bell profit warning from Snapchat owner Snap Inc . (NYSE:SNAP) also saw the stock tumble 28% in extended trading.

The dollar has been falling alongside U.S. Treasury yields from multi-year highs, and the market has already priced in aggressive easing by the Federal Reserve.

Meanwhile, there are small positive signs for the global economy, with the Chinese city of Shanghai expected to lift its lockdown soon and U.S. President Joe Biden's comments earlier in the week about a possible easing of the trade war with China lifting risk sentiment at the dollar's expense.

Investors now await other global manufacturing PMIs over the course of the day will be another key focus for investors.

"If the data is good, that should continue the trend of an easing dollar as the global economy recovers from various shocks," Commonwealth Bank Of Australia strategist Joseph Capurso told Reuters.

"The U.S. dollar is carving out a peak and the commodity currencies like the Australian dollar are carving out a bottom, but it's going to be bumpy."

Dollar Up, but Small Signs of Economic Recovery Limits Gains

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