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

Dollar Weakens After Lagarde Props Up Euro; Risk-Off Tone Still Dominant

Forex May 24, 2022 08:58
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

By Geoffrey Smith

Investing.com -- The dollar fell again in morning trade in Europe after European Central Bank President Christine Lagarde chose not to rule out a 50 basis point interest rate hike at the bank's July meeting.

By 3:30 AM ET (0730 GMT), the euro traded up 0.3% at $1.0724, its highest level in nearly a month. The dollar index, in which the EUR/USD rate has the biggest weighting, was down 0.2% at 101.86.

The greenback has lost its momentum in recent days since the ECB shifted more clearly to signaling what would be its first interest rate hike in a decade at its July meeting, narrowing the distance in policy terms between it and the Federal Reserve.

Lagarde had published a blog on the ECB's website on Monday, saying that the ECB would be out of negative interest rate territory by the end of the third quarter. While that confirmed a shift toward tightening, the euro had weakened later in the day on perceptions that the timeframe was chosen in order to rule out a 50 basis point hike already in July, which the ECB's more hawkish policymakers say is necessary.

Talking to Bloomberg on the sidelines of the World Economic Forum in Davos, Lagarde pushed back against such suggestions, saying that nothing was off the table, but repeated that the ECB's moves should be gradual.

The ECB's deposit rate currently stands at -0.5%, while its refinancing rate stands at 0%. In the current environment of high excess liquidity, it is the deposit rate that effectively sets a lower bound for market interest rates.

Lagarde was speaking just before the publication of the first of the preliminary purchasing managers indices for May from S&P Global. Both the manufacturing and services PMIs for France came in a little below expectations, but nonetheless, both stayed clearly in the territory signaling growth. Germany's manufacturing PMI surprisingly managed its first gain in three months.

More broadly, the market tone has shifted back to risk-off after a reassessment of China's fiscal stimulus announcement on Monday. While markets welcomed the idea of over $20 billion worth of tax rebates for corporates, the overall volume was disappointing for many and still offered no convincing way out of the growth trap created by Beijing's 'Zero Covid' strategy.

The offshore yuan fell 0.4% to 6.6857, after rising sharply in response to Monday's news.

Elsewhere, the Turkish lira weakened above 16 to the dollar for the first time this year amid ongoing fears about rampant inflation. The country is a big net importer of energy and consequently highly exposed to the leap in oil and gas prices this year. By contrast, the tightly-managed Russian ruble rate continued to go from strength to strength, hitting another four-year high of 56.91 against the dollar.

Dollar Weakens After Lagarde Props Up Euro; Risk-Off Tone Still Dominant
 

Related Articles

Dollar Edges Lower as Investors Weigh Powell Testimony
Dollar Edges Lower as Investors Weigh Powell Testimony By Investing.com - Jun 24, 2022

By Scott Kanowsky   Investing.com -- The U.S. dollar slipped slightly on Friday, as investors remained cautious of the impact of tighter central bank policies around the world...

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