The U.S. dollar found support on Tuesday as investors looked to U.S. inflation data due later in the week after softer-than-expected jobs data eased but did not dispel concerns about early tapering of the Federal Reserve’s monetary stimulus.
The euro fetched $1.2178, a bounce back from a three-week low of $1.2104 set on Friday, but slightly below its 20-day moving average. The dollar also crept back through its 20-DMA against the yen, and rose 0.15% to 109.42 yen.
The dollar’s index against a basket of six major currencies stood at 90.059, not far from 89.533, a 4 1/2-month low touched late last month. It has been idling around there while investors try and gauge the U.S. recovery and policy response.
“Worries remain that the Fed may start discussing tapering asset purchases at next week’s FOMC meeting,” said Philip Wee, an FX strategist at Singapore’s DBS Bank. “More so after U.S. Treasury Secretary Janet Yellen’s comment that higher U.S. interest rates would be good for the economy,” he added.
Yellen said slightly higher rates “would actually be a plus for society’s point of view and the Fed’s point of view,” during a weekend interview with Bloomberg.
Many investors now expect the Fed to unveil a plan to reduce its bond purchase later this year, and actual tapering to start early next year.
The British pound fell 0.1% to $1.4157 and the Australian dollar eased slightly to $0.77444, even though both stuck in ranges seen over the past couple of months.
With recent trading channels tight, implied volatilities on both currencies have dropped to their lowest levels since early 2020, before markets were pummelled by the COVID-19 pandemic.
Cryptocurrencies were also heavy. Bitcoin eased 2% to a three-week low of $32,418, while ether fell 4% to a one-week low of $2,431.93.
Reference: CNBC
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