Dollar remains stable in early trade

21 Feb 2023 , 08:44 AM

On Tuesday, the dollar was trading below recent heights as a three-week rally fizzled out and traders awaited economic data to determine whether further dollar appreciation  was justified.

The dollar’s gain so far this month has been backed by strong U.S. labour market statistics and persistent inflation; the next move will be determined by Tuesday’s European and U.S. manufacturing data and Friday’s core PCE price index.

The dollar held stable at 132.24 yen/ dollar and $1.0687 / euro after a calm Monday due to President’s Day in the United States, with the common currency finding good support above $1.06.

The U.S. dollar index has increased for three weeks in a row, increasing by nearly 1.7% so far in February, but it has since stabilized at 103.86, falling from a six-week high of 104.67 reached on Friday.

A 50 basis point raise in March is all but priced in in Europe, according to Fed funds futures, which now indicate a 16% chance of that happening. The foreign exchange markets were mostly stable.

While traders awaited the release of the minutes from the Reserve Bank of Australia’s February meeting, the Australian dollar, which was trading at $0.6920, was supported by rising oil prices and a stable Chinese yuan.

Ahead of the central bank meeting on Wednesday, the New Zealand dollar remained stable at $0.6259. The benchmark interest rate in New Zealand is currently priced at 4.75% by the markets, which are also taking Cyclone Gabrielle’s economic impact into consideration.

At $1.2042, the pound remained constant. The Swedish crown increased overnight as a result of sticky inflation and minutes from the central bank showing policymakers were ready to continue raising rates.

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