US dollar steady

13 May 2024 , 02:47 PM

The dollar steadied against other major currencies on Monday. The dollar index, which compares the value of the US dollar to a basket of other currencies, was essentially unchanged at 105.34 this week after rising for the first time in two weeks.

Expectations for interest rate cuts this year have strengthened following the Federal Reserve's policy statement and a softer-than-expected April U.S. payroll report.

According to CME's FedWatch Tool, markets have priced in a 61.2% possibility of rate reductions of some kind starting with the Fed's September meeting, with a total of roughly 50 basis points of cuts anticipated.

However, speakers last week disagreed on whether interest rates were high enough, which led to a range of remarks from Fed officials. A study conducted on Friday indicated that consumers' expectations for inflation had increased, which might complicate matters further.

Since the economy appears to be slowing down according to recent data, investors are checking to see how persistent inflation is.

This week's inflation data, which come in the shape of the producer pricing index (PPI) on Tuesday and the consumer price index (CPI) on Wednesday, will provide some insight to the market.

Additionally, Fed Chair Jerome Powell is scheduled to speak at a Foreign Bankers' Association gathering in Amsterdam on Tuesday.

As the euro zone gets ready for its own inflation report on Friday, the euro remained steady at $1.0769.

With a daily decrease of 0.03%, sterling remained stable at $1.2517. Britain's economy emerged from the mild recession it had entered in the second part of last year, with data released on Friday showing that growth in the first quarter was the highest in almost three years.

The yen dropped to 155.91, down 0.11%. Following two apparent interventions, the dollar saw a 3% dip at the beginning of the month—its biggest weekly percentage decrease since early December 2022—but has since rallied.

CFTC data on yen futures indicates that non-commercial short positions have decreased from 179,919 contracts on April 23, the highest since June 2007. This is despite the fact that the market is still pessimistic about the Japanese currency.

The markets will be wary of further intervention as the yen gradually declines.

The offshore yuan of China remained stable at 7.2352, its lowest level in a week.

Data over the weekend indicated that while producer prices continued to decrease, consumer prices in China increased in April. This suggests that domestic demand is improving as the government works through obstacles to support a faltering economy.

The central bank promised to aid in the rehabilitation of the economy.

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