Dollar weakens in early trade

18 Apr 2023 , 10:01 AM

The dollar weakened on Tuesday after rising overnight as investors awaited data from China that would show the extent of the rebound of the second-largest economy in the world. Strong U.S. economic data also strengthened expectations that the Federal Reserve will raise interest rates again in May.

The dollar index, which compares the value of the dollar to six important rival currencies, increased 0.5% over night before declining 0.039% to 102.05.

According to data released on Monday, single-family homebuilders’ confidence grew for a fourth consecutive month in April, while industrial activity increased in New York State for the first time in five months.

According to the CME FedWatch tool, markets are pricing in a 91% chance that the Fed will increase interest rates by 25 basis points at its next meeting in May, despite traders’ expectations for rate reduction at the end of the year.

Investor attention will be on China’s first quarter GDP data, which is scheduled for release later today, to gauge how quickly the economy has rebounded after the end of stringent COVID restraints in December. Although there are still challenges and an uncertain future, it is anticipated that economic growth has picked up speed since the pandemic dip.

Inching away from the one-year high of $1.10755 it reached last week, the euro was down 0.01% at $1.0925.

At 134.36 to the dollar, the Japanese yen gained 0.09%, remaining close to the one-month high of 134.57 that it reached on Monday. Last night, the value of the pound increased by 0.01% to $1.2375.

To $0.619, the kiwi increased by 0.10%.

The Australian dollar gained 0.01% to $0.670 as investors awaited the release of the minutes from the most recent Reserve Bank of Australia meeting, during which the institution stopped its recent rate hikes to evaluate the effects of earlier increases.

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