Dollar retreats from near three-month high, faces downward pressure.

7 Feb 2024 , 10:09 AM

After dropping from a nearly three-month high versus the euro in the previous session, the dollar was still under pressure on Wednesday. The drag was increased by a decrease in U.S. government yields.

Following a two-day surge of as much as 1.4% against the euro due to unexpectedly strong U.S. jobs data and more hawkish rhetoric from Federal Reserve Chair Jerome Powell, which scuppered speculations for an early interest rate decrease, analysts attributed the dollar’s decline to technical considerations.

Due to strong demand during the auction of new three-year notes, U.S. Treasury rates also declined from overnight highs, which helped to undermine the dollar.

In early Asia trade on Wednesday, the dollar was little changed at $1.0755 per euro, following a 0.1% decline on Tuesday, when it had hit its highest level since November 14 at $1.0722.

After falling 0.29% on Tuesday, the U.S. dollar index, which compares the value of the currency to six important rivals, including the euro, was unchanged at 104.14. On Monday, it had hit its highest point since Nov. 14 at 104.60.

The dollar had a 0.49% decline overnight but remained stable at 147.905 yen. Changes in Treasury yields often have a significant impact on the currency pair.

The U.S. CPI report on Tuesday is seen by analysts and traders as a crucial test for rate bets.

According to the CME Group’s FedWatch Tool, traders are currently pricing in a 19.5% possibility of a cut in March, down from a 68.1% chance at the beginning of the year.

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