U.S. dollar slides as stocks rally; focus on Fed
The dollar slipped on Monday against its major peers, dropping to a two-week low versus the yen, as positive news about a COVID-19 vaccine and a wave of merger and acquisition deals lifted the mood in global equity markets.
Investors also looked ahead to an event-packed week which includes a Federal Reserve meeting and the appointment of a new Japanese premier.
U.S. stocks rose on Monday on signs of progress in developing a COVID-19 vaccine and a flurry of multibillion-dollar deals, including reports of Oracle winning the battle for the U.S. arm of TikTok.
Drugmaker AstraZeneca on Monday said it resumed its British clinical trials of its COVID-19 vaccine, one of the most advanced in development, helping kick off a rally in stocks.
In afternoon trading, the dollar index fell 0.3% to 93.029, after posting two straight weeks of gains.
Speculators trimmed net short dollar positions for the second straight week to $32.67 billion, according to Reuters calculations and Commodity Futures Trading Commission data. That’s off nine-year highs of $33.68 billion in late August.
This week’s Fed Reserve meeting will be its first since Chairman Jerome Powell unveiled a policy shift toward greater tolerance of inflation, effectively pledging to keep interest rates low for longer.
“The updated ‘dot-plot’ is expected to reinforce the message that the current zero-interest-rate policy stance is appropriate through 2023,” said NatWest in its latest research note, a scenario that is negative for the dollar.
Fed officials’ median projection on the number of rate moves is commonly referred to as its “dot-plot.” The dollar fell 0.4% against the yen to 105.70 yen, after earlier sliding to a two-week low.
The Bank of Japan’s meeting on Thursday is not expected to yield any policy changes but the bank may be quizzed on whether it could follow the Fed’s inflation stance.
The euro was up 0.2% versus the dollar at $1.1867.
The single currency had spiked to a one-week high above $1.191 after Thursday’s European Central Bank meeting, before easing back as policymakers talked it down the next day.
Reference: CNBC
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