The dollar remains stable in early trade

12 Jun 2023 , 10:13 AM

In spite of the dollar maintaining its position against several of its key competitors on Monday, traders were on high alert ahead of central bank meetings this week, including the Federal Reserve’s where it will announce its interest rate decision.

Early Asian trade saw the US dollar-pegged near a one-month low against the British pound and the Australian dollar at $1.25805 and $0.6745, respectively. However, the movement was muted because most of Australia was on holiday.

As markets look for cues from policymakers on the future course of interest rates, the Fed, ECB, and Bank of Japan (BOJ) policy meetings will set the tone for the week.

According to the CME FedWatch tool, money markets anticipate the Fed will take a break when it announces its interest rate decision on Wednesday. This assumption helped Wall Street soar to a 13-month high on Friday as risk sentiment increased.

The US dollar index lost around 0.5% last week, which was the biggest weekly loss since mid-April. It was last slightly higher at 103.58.

The vast majority of analysts surveyed by Reuters, on the other hand, predict that the ECB will increase its benchmark interest rate by 25 basis points this week and once more in July before halting for the remainder of the year as long as inflation is persistent.

After lifting rates to 5.5%, the highest level in more than 14 years, and finishing its most aggressive cycle of rate increases since 1999, the Reserve Bank of New Zealand signalled this month that it was done tightening. The Kiwi fell 2.7% as a result in May.

The Australian dollar was last trading 0.07% lower at $0.6126, although it was still very close to Friday’s almost two-week high of $0.6138.

The Japanese yen held steady at 139.35 to the dollar in other markets.

As strong corporate and household spending soften the blow from slowing international demand, the BOJ is anticipated to maintain its ultra-loose monetary policy this week and a prediction for a moderate economic recovery, sources told Reuters.

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