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"2021-05-19

US dollar stabilizes ahead of FRS protocol

The US dollar has stabilized near its six-year low against its Canadian counterpart and eased its losses against European currencies as expectations that US interest rates will remain low eroded the US dollar. Minutes of the last meeting of the US Federal Reserve, which will take place later on Wednesday, are expected to confirm policymakers believe rate hikes are still around the corner.

Later in the trading day, investors will also be looking closely at consumer price data in the UK and Canada to determine how quickly the world's major economies will be forced to rein in their accommodative monetary policy, which is key to the US dollar's medium-term trend. “What worries me most is the relative strength of inflation», - said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo. “The recent release of US consumer price data has been quite high. If the UK and Canada remain below this level, it suggests that the pace of normalization in the United States will be faster. The sale of US dollars may not last long».

The US dollar is trading at CAD 1.2075 against the Canadian dollar, close to its lowest level since May 2015.

The British pound sterling is trading at $ 1.4182, close to its strongest level since late February.

The euro exchange rate continues to remain stable, having risen slightly to the level of 1.2231 US dollars.

The US dollar has slightly depreciated against the Japanese yen at 108.94 yen. Against the Swiss franc, the US dollar remains stable, strengthening in the 0.8973-0.8977 CHF per US dollar price range.

Economic data released last week showed US consumer prices rose 4.2% in April from a year earlier and posted the fastest rise in more than a decade, stunning investors. Fed policymakers said this is a temporary jump and reiterated that they expect interest rates to remain low, which weakened the dollar slightly, but not everyone shares the Fed's view. The dollar index was quoted at 89.833 against a basket of six major currencies, close to its lowest level since late February.

Expectations of a tightening of fiscal policy in Canada and the gradual lifting of restrictions due to the coronavirus in the UK have lifted the currencies of both countries, but any suggestion of favorable inflation could help the US dollar to recoup some of its losses. The Aussie and New Zealand dollars were down slightly, as the dollar antipodes struggled to overcome serious technical resistance, but sentiment remained positive on renewed increases in commodity prices, according to some traders.

In the cryptocurrency market, bitcoin dropped to its three-month low of $ 40,548, while rival ether plunged 5.7% to $ 3,197 due to cryptocurrency market fluctuations after China banned its financial institutions and payment companies from providing services related to transactions in cryptocurrency.

Gold prices are holding steady near a four-month high, helped by the weakening US dollar and the anticipation of the release of the minutes of the last meeting of the US Federal Reserve, which is expected to shed more light on the views of Fed policymakers on US inflation. The cost of an ounce of gold fluctuates in the price range of 1867-1871 US dollars.

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