U.S. Dollar Weakens On Receding Inflation Fears
May 25 2021 - 3:21AM
RTTF2
The U.S. dollar moved lower against its major trading partners
in the European session on Tuesday, after a slew of speeches from
Fed officials confirmed that easy policy would remain on hold,
helping ease fears about policy tightening.
Fed officials talked down inflation risks overnight and repeated
that the current price pressures are transitory.
Fed officials Lael Brainard, Raphael Bostic and James Bullard
suggested that supply bottlenecks could lead to higher prices in
coming months but the spike should be temporary.
Treasury yields fell on the Fed comments. The yield on the
benchmark 10-year treasury note fell to 1.591 percent.
Investors await U.S. personal consumption data, the Fed's
preferred inflation measure, due later this week for policy
clues.
The greenback touched a 4-day low of 1.4211 against the pound
and more than a 3-month low of 0.8930 against the franc, down from
its early highs of 1.4147 and 0.8971, respectively. The greenback
is likely to find support around 1.45 against the pound and 0.87
against the franc.
The greenback pulled back from its prior highs of 108.86 against
the yen and 1.2211 against the euro and depreciated to near a
2-week low of 108.56 and a 4-1/2-month low of 1.2262, respectively.
On the downside, 106.00 and 1.24 are possibly seen as its next
support levels against the yen and the euro, respectively.
The greenback weakened to a 6-day low of 0.7240 against the
kiwi, 4-day lows of 1.2030 against the loonie and 0.7776 against
the aussie, after rising to 0.7203, 1.2056 and 0.7746, respectively
in early deals. If the greenback falls further, 0.74, 1.18 and 0.81
are likely seen as its next possible support levels against the
kiwi, the loonie and the aussie, respectively.
The euro rose on risk appetite, as investors scaled back
expectations over a Fed rate hike.
Survey data from the ifo Institute showed that German business
sentiment improved more than expected in May.
The business confidence index rose to 99.2 in May from 96.6 in
the previous month. The reading was also above economists' forecast
of 98.2.
The euro spiked higher to more than a 3-year high of 133.52
against the yen and a 4-day high of 1.4770 against the loonie, off
its previous lows of 132.73 and 1.4702, respectively. Next key
resistance for the euro is seen around 139.00 against the yen and
1.51 against the loonie.
Reversing from an early low of 0.8619 versus the pound, the euro
edged higher to 0.8619. The euro may test resistance around the
0.88 level, if it rises again.
The euro rose back to 1.0964 against the franc, not far from a
4-day peak of 1.0968 set at 2:45 am ET. The euro is poised to find
resistance around the 1.10 region.
The euro rebounded from its prior 4-day lows of 1.5740 against
the aussie and 1.6905 against the kiwi and was trading at 1.5796
and 1.6969, respectively. The currency is seen finding resistance
around 1.61 against the aussie and 1.72 against the kiwi.
Looking ahead, U.S. consumer confidence index for May, new home
sales for April and FHFA's house price index and
S&P/Case-Shiller home price index for March will be out in the
New York session.
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