Commodity currencies hold an advantage as the dollar waits for inflation and the Fed

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A pictured illustration shows US $ 100 banknotes taken in Tokyo on August 2, 2011. REUTERS / Yuriko Nakao

The dollar sustained losses against the currencies of major commodity exporters, which were supported by expectations of further increases in the prices of oil, copper, steel and other metals.

Traders are anxiously awaiting the release of US consumer price data on Wednesday to gauge whether inflationary pressure is building, which could push Treasury yields higher and slow the dollar’s fall, some traders say .

Treasuries and the dollar have swung back and forth as investors adjust their expectations about when the U.S. Federal Reserve will begin to cut bond purchases and raise interest rates as the he US economy is growing.

A slew of Fed speakers this week will likely leave investors with plenty to consider as they attempt to forecast the reaction of policymakers to the diminishing risks posed by the coronavirus in some major economies.

“Right now, the easiest reflation trade is to watch commodity prices and buy currencies,” said Yukio Ishizuki, currency strategist at Daiwa Securities.

“Markets have doubts about the Fed’s benevolent view of inflation, but policy uncertainty is keeping some currency pairs within a narrow range.”

Against the Canadian dollar, the US dollar traded at CAN $ 1.2097, near its weakest in more than three years.

The Australian dollar edged up to $ 0.7836, near an 11-week high. Across the Tasman Sea, the New Zealand dollar was listed at $ 0.7267, which is near its highest level since late February.

The greenback was also close to a two-week low against the Mexican peso.

Many investors expect demand for commodities to increase as coronavirus vaccinations allow more countries to resume normal economic activity.

Additionally, supply constraints for some commodities suggest that prices could remain high for an extended period, which has made some commodity currencies the best performing against the dollar so far this year.

Investors are also focusing on how the U.S. labor market will affect inflation in the world’s largest economy, but a disappointing non-farm payroll report last week left the dollar mixed against other currencies.

The British pound bought $ 1.4130, near its strongest since February 25, as investors applauded Britain’s progress in reopening its economy.

The euro edged up to $ 1.2137.

Against the yen, the dollar was stable at 108.87.

In the cryptocurrency market, Ether was listed at $ 3,906, down slightly from the record high of $ 4,200. The bigger rival bitcoin fell slightly to $ 55,578.

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Bid price for currencies at 0006 GMT

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