The Dollar Fails to Get Out of the Downward Trajectory… and Expectations of a Fall Below 100 By Investing.com

The Dollar Fails to Get Out of the Downward Trajectory… and Expectations of a Fall Below 100 By Investing.com
The Dollar Fails to Get Out of the Downward Trajectory… and Expectations of a Fall Below 100 By Investing.com
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© Reuters.

Investing.com – The dollar fell near a nine-month low against the euro and pared recent gains against the yen on Tuesday, as traders assessed the risks and path of a U.S. recession. The dollar failed to get out of the downward path that clouded its dealings recently, especially after the release of the recent US inflation data, which fell more than expected.

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dollar now

The greenback – which measures the greenback against a basket of six peers, including the euro and the yen – fell 0.12% to 101.89, nearing its lowest level of 101.51, which it reached last week.

The euro rose 0.08% to $1.0880, bringing it close to Monday’s peak of $1.0927, the strongest since April.

further decline

Ray Attrell, head of foreign exchange strategy at National Australia Bank (OTC: NBAZY), which expects the dollar index to fall below 100 by the end of March, said the euro would rise to $1.10.

“This is integral to our bearish view of the US dollar, which is that the US will not be the global growth leader.”

Money market traders see only two more quarter-point rate increases by the Fed to a peak of around 5% by June, with a two-quarter point cut before the end of the year. The Fed itself also insisted that at 75 basis points more tightening is likely on the way.

European Central Bank and raise interest

In contrast, the single was boosted by comments from European Central Bank officials that indicated a more aggressive tightening in policy.

The latest was European Central Bank President Christine Lagarde, who reiterated on Monday that the central bank will continue to raise interest rates quickly to slow inflation, which remains very high.

Joseph Capurso, strategist at Commonwealth Bank of Australia (OTC: CMWAY) wrote in a client note that, “Chairman Lagarde has been among the hardliners, so we are comfortable with our call for a 50 basis point increase at the next two meetings.” Testing $1.1033 per euro this week.

The dollar and the yen

Elsewhere, the dollar fell 0.41% to 130.11 yen, retreating after two sessions of strong gains.

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Last week, the dollar fell to as low as 127.215 yen, its lowest level since May, ahead of the Bank of Japan’s policy review as investors bet the BoJ will start winding down its stimulus programme. However, the Bank of Japan left its policy unchanged, which gave the dollar some relief.

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Despite this, many are still expecting an optimistic shift from the Bank of Japan this year, as policymakers continue to adjust policy in order to extend the life of the yield curve control (YCC) mechanism, which pegs and maintains short-term interest rates at -0.1%. 10-year returns are in the range of about zero.

said Atrell of National Australia Bank, which expects USDJPY to drop to 125 by the end of March.

dollar against other currencies

Meanwhile, it was last trading at $1.2391, up 0.12% on the day.

The Australian dollar also rose 0.18% to $0.7041, and the New Zealand dollar rose 0.27% to $0.6508.

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