Dollar weakens marginally

28 May 2024 , 08:41 AM

Tuesday morning is seeing a minor increase in risk appetite, as the dollar weakened against its peers. This week’s big inflation data from major economies will be closely watched by markets for clues about the outlook for interest rates globally. Dollar index is down by 0.24% to 104.35.

Due to holidays in Britain and the US, currency movements were rather muted in the early hours of Asia following a calm overnight session. Despite this, the mood was generally optimistic as global shares firmed.

Despite some dovish remarks made by European Central Bank (ECB) policymakers on Monday and statistics indicating that German business morale stagnated in May, the euro was somewhat stronger at $1.0860.

Inflation data from Germany, which is scheduled for release on Wednesday, and the figure for the entire euro zone bloc on Friday will be closely monitored for indications of when the European Central Bank (ECB) would likely lower interest rates, which is anticipated to occur next week.

At $1.2774, the New Zealand dollar last traded at a strength not seen since mid-March, up about 0.1%, while sterling stayed close to a two-month high.

The Australian dollar increased by 0.03% to $0.6657. On Wednesday, the nation’s monthly consumer price index data is also anticipated.

On Friday, the Federal Reserve’s preferred measure of Inflation, the U.S. core personal consumption expenditures (PCE) price index report will be issued.

Over the past few years, the outlook for U.S. interest rates has largely determined currency movements. However, recent data from the largest economy in the world has been erratic, which has undermined policymakers’ confidence in the scope and pace of rate decreases anticipated this year.

In relation to a currency basket, the dollar fell 0.01% to 104.55.

In other news, the yen continued to linger around the 157 per dollar mark, closing at 156.87 last month, but it was on course to record its first monthly gain of 2024, supported by rumours of Japanese government intervention in late April and early May.

On Friday, Tokyo inflation data, which is a leading indication of national statistics, is also scheduled. These data may offer more insights into the timing of potential rate hikes by the Bank of Japan (BOJ).

Following years of extremely loose monetary policy, BOJ Governor Kazuo Ueda stated on Monday that the bank will move slowly with inflation-targeting frameworks, pointing out that some obstacles are “uniquely difficult” for Japan.

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