Dollar touches 5-week high

15 May 2023 , 08:31 AM

In comparison to key peers, the U.S. dollar reached a five-week high on Monday as the safe-haven currency gained from domestic inflation concerns and global growth concerns, extending gains after its biggest weekly climb since September.

The Thai baht increased by about 1% as the opposition in Thailand defeated parties supported by the military in weekend elections, while the Turkish currency fell to a two-month low with the appearance of a runoff.

A surge in Treasury yields and a jump in long-term inflation forecasts among American consumers helped the dollar after the possibility of a Federal Reserve rate hike next month was once again raised.

These probabilities have increased from nearly nil before the University of Michigan poll to 13% as of late. By year’s end, the market is still expecting up to three quarter-point reductions.

Meanwhile, China is the focus of fresh concerns of a global recession following a string of dismal economic statistics including imports and inflation that indicated weak domestic demand. The retail sales figure released on Tuesday may provide additional proof.

In Monday’s offshore trading, the Chinese yuan fell to a new two-month low of 6.9740 per dollar before modestly recovering to 6.9694.

The seven-day reverse repo rate of the People’s Bank of China remained constant at 2%.

Early Asian trading saw the dollar index reach 102.75 for the first time since April 10 before dipping slightly to 102.63. The index compares the dollar to six significant counterparts. Last week, it increased by 1.4%.

The dollar index should climb this week towards CBA’s end-June target of 104 since the U.S. dollar is oversold, according to Capurso.

In Tokyo, the yield on the 10-year Treasury note fluctuated little and stayed close to 3.47%.

The yen, which often moves in opposition to U.S. long-term yields, remained under pressure as a result. Prior to closing flat at 135.80 per dollar, the value of the Japanese yen dropped as low as 136.03.

Following a brief slide to a new five-week low of $1.08445 earlier in the session, the euro edged up 0.11% to $1.08605 today.

The dollar increased by 0.31% to 19.64 Turkish Lira at the time of writing, having earlier reaching 19.70 for the first time since March 10.

President Tayyip Erdogan surpassed expectations, holding a substantial lead over his rival but falling short of a clear majority, sending Turkey into a runoff election.

In onshore Thai trade, the US dollar fell 0.65% to 33.76 baht after previously falling as high as 0.92%.

With parliamentary procedures established by the military regime, it is far from guaranteed that Thailand’s opposition parties will form the country’s next government despite their unexpected election victory on Sunday.

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