The U.S dollar suffered a setback early on Wednesday during the Asia trading session in spite of the U.S Treasury yields increasing by a many-year high. The market now patiently expects the U.S inflation report scheduled to be published on Thursday so there can be an idea of the Federal Reserve’s possible timeline in executing the increment in interest rates.
The American dollar index that monitors the dollar’s progress against other major fiat currencies in the financial market stepped down by 0.16% to be at 95.490. The ten-year Treasury yields skipped up to 1.97% on Tuesday for the first time since November 2019.
On the trading pairs’ part, USD/JPY slid downwards by 0.14% to be at 115.38, and the AUD/USD trading pair climbed up a bit by 0.24% to attain 0.7162, while the NZD/USD trading pair also gained 0.17% to be at 0.6659.
The Chinese Yuan is not currently doing well with the dollar as their pair, USD/CNY shed 0.08% to sit at 6.3614. China’s state-sponsored funds entered the stock markets on Tuesday to purchase local Chinese stocks following the benchmark’s index intraday drop, which happens to be the biggest since last August.
The GBP/USD trading pair, which is one of the world’s leading pairs, gained 0.17% to achieve 1.3564.
The ECB Effect
The President of the European Central Bank, Christine Lagarde, stated on Monday saying there will be no serious need for a broad-based tightening policy. She made the statement in her bid to calm high expectations of a rapid increase in interest rates.
The Euro gained 2.7% last week as Lagarde made a statement that investors translated as a potential hawkish move. Speculations flew that there would be an interest rate increase at any moment from then.
An analyst at Westpac wrote that the dollar index is currently holding up as the market sizes up the possibility of a sudden Federal Reserve policy in reaction to the European Central Bank’s hawkish turnaround.
There are speculations that a more stringent ECB policy might end up capping the dollar’s gain in the short term. The medium-term bullish trajectory of the dollar is still in operation; as the dollar index focuses on buying dips down to the lower 95 points, the analyst went further.
Market players are now expecting the U.S inflation report and the CPI scheduled to be released on Thursday for information on where the interest rate moves may be headed. Investors are, however, speculation on over a 70% possibility of a 25 bps increase when the Federal Reserve meets again in March.