The dollar gives up some gains after the boost from the Fed; The Australian falters
U.S. dollar banknotes are laid out for a photograph on September 7, 2017 in Hong Kong.
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The dollar index, which rose after the Fed’s surprise hawkish tilt last week, gave up some of its gains on Monday, as the Australian currency stumbled on lower prices for the country’s main export commodity. country, iron ore.
The dollar index, which tracks the greenback against six major currencies, slipped to 92.286 after peaking at 92.405 on Friday, a level not seen since April 13.
It jumped 1.9% last week – the biggest increase since March 2020 – as the US Federal Reserve signaled the earlier-than-expected end of its ultra-relaxed monetary policy, triggering a collapse in US stocks and prompting analysts revise their forecasts for stocks. and currency performance.
The Fed’s policy stance has turned into a positive wind for the dollar, which presents a challenging environment for risky assets, Westpac analysts said.
While the index has the opportunity to test highs reached in March after its recent impulse gains, “there is not enough juice for a sustained mid-term breakout beyond that,” they added.
Goldman Sachs analysts agreed that the dollar’s gains may not be sustainable, noting that other central banks will also have to consider normalizing their policy as their economies recover from depressed levels caused by the pandemic.
Benchmark 10-year US Treasury yields fell to their lowest since early March at 1.4110% on Asian trading, while those on 30-year bonds slipped to 1.9990% for the first time in more than four months.
The yield curve, or the spread between two-year and 30-year rates, has been the flattest since early February.
As the Fed’s hawkish stance dampened investor risk appetite, the safe haven Japanese yen hit a one-week high against the dollar. It was up 0.3% to 109.80 per dollar.
In other currencies, the aussie fell to $ 0.7474, a level not seen since December 21, 2020, driven by a 5% drop in iron ore prices as a seasonal slowdown in activity construction in major Chinese steel producers and consumers weighed on confidence.
The euro barely changed at $ 1.1859, after hitting a 2.5 month low at $ 1.1847 on Friday. The British pound hit a two-month low of $ 1.3790 on Monday.
In cryptocurrencies, bitcoin fell 4% to $ 34,016, while ether changed hands to $ 2,077.58.