Dollar trades near 1-year lows in early trade

18 Jul 2023 , 11:41 AM

In response to last week’s lower-than-expected U.S. inflation report, the dollar swayed close to a more than one-year low against its key peers on Tuesday as investors watched new catalysts to determine whether the greenback still had room to fall.

The U.S. dollar index, which compares the value of the dollar to a basket of six other currencies, slightly decreased to 99.84 in early Asian trading on Monday after falling to its lowest level since April 2022 on Friday.

Last week, the index experienced its worst week of 2023 as a result of data showing that U.S. inflation has further decreased, with consumer prices showing their smallest annual gain in more than two years. This has relieved pressure on the Federal Reserve to keep raising interest rates.

The euro reached a new 17-month high against the dollar of $1.1256, while sterling increased by 0.15% to $1.3094, not far from its previous high of $1.3144, which was also its best level since April 2022.

The Fed is expected to raise rates by 25 basis points at its policy meeting later this month, but rates are expected to start falling as early as December, according to the money markets.

Investors, on the other hand, anticipate that the Bank of England and the European Central Bank will still need to raise interest rates.

The Reserve Bank of Australia’s July policy meeting minutes revealed that the decision to maintain interest rates on hold was made because policy was obviously restrictive, which caused the Australian dollar to give up some of its previous gains in other currencies.

The Australian dollar last moved up 0.07% to $0.6821.

The New Zealand dollar gained 0.1% to $0.6332 although still nursing losses from the prior session.

The Antipodean currencies, which are frequently used as liquid substitutes for the Chinese yuan, fell on Monday as China’s second-quarter GDP figures revealed that the country’s economy was expanding at a sluggish rate due to weak demand both at home and abroad.

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