The dollar remains stable in early trade after a major decline

17 Jul 2023 , 12:09 PM

After experiencing its worst weekly decline of the year, the dollar took a break on Monday as traders held off on further selling it in anticipation of economic data and policy choices.

Before U.S. retail sales and British inflation later this week and a series of central bank meetings next week, Chinese growth statistics and loan-rate settings are due later in the afternoon.

The euro hovered just below that top at $1.1228 after rising 2.4% last week to a 16-month high. The yen maintained steady at 138.69 per dollar last week, rising 2.4% overall.

The dollar’s decline started with yen purchasing as investors unwind positions funded by the currency in developing markets, but it accelerated when weaker-than-expected U.S. inflation data supported bets that interest rates in the country will soon peak.

Both the Federal Reserve and the European Central Bank are expected to raise interest rates next week, but after that, market pricing suggests that the Fed will likely pause before cutting rates. Meanwhile, in Europe, another boost is likely in the works.

The U.S. dollar index fell 2.2% last week, the most drastic loss in a single week since November, and remained stable at 99.956 early on Monday in the Asian session.

The Australian dollar has recovered from its five-month high of $0.6895 to trade at $0.6830 on Monday, and the New Zealand dollar was trading at $0.6364, down from its five-month high of $0.6412 on Friday.

If the Chinese figures are disappointing, the Antipodeans may come under pressure. The currency has moved so dramatically in other places that a brief break might be necessary.

Sharp yen advances have stalled as traders question if the ultra-dovish Bank of Japan will actually change its policy at its meeting next week, given that their rhetoric suggests they are not in a rush.

Last week, the Swedish and Norwegian crowns both appreciated by more than 5% against the US dollar. At $1.3089, sterling was trading slightly below its 15-month high set last week.

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