Euro near 3-month low after soft data, dollar awaits Fed’s minutes
The euro staggered near a three-month low against the dollar on Wednesday after disappointing German data raised doubts about the strength of the economic recovery, while the dollar awaited the Federal Reserve’s minutes from its last policy meeting.
The single currency changed hands at $1.1820, having touched a three-month low of $1.1806 on Tuesday. Against the yen, it fell to 130.81 yen, edging near its two-month low of 130.05 set on June 21.
Investor sentiment in Germany, the euro zone’s biggest economy, fell sharply in July, though it remained at a very high level, the ZEW economic research institute reported.
Even more worrying, separate data showed orders for German-made goods posted their sharpest slump in May since the first lockdown in 2020, hurt by weaker demand from countries outside the euro zone.
Cautious risk sentiment underpinned the yen, which strengthened to 110.645 yen per dollar, extending its rebound from its 15-month low of 111.64 touched last week.
The yen’s gains came as U.S. bond yields fell to their lowest levels since February after data signaled the service sector expanded at a slower pace.
Yields have fallen in recent weeks also as many speculators who had bet that rising inflation could prompt the Federal Reserve to tighten its policy soon have been forced to bail out of their positions.
Minutes from the Fed’s June policy meeting due later on Wednesday, however, could offer fresh hints on its policy outlook.
“Many people seem to think the Fed will drop hints on tapering in August, and will say in September that it is considered and it will be implemented in December. But I believe the Fed could move earlier than those timelines,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
“The important point is, the Fed did already raise their inflation forecast.”
Elsewhere, cryptocurrencies were in a holding pattern, with bitcoin little changed at $34,066 and ether at $2,308.
China-U.S. yield spread widens to 4-month high
The yield spread between Chinese and U.S. sovereign bonds was quoted at its widest since March 3 on Wednesday, as U.S. yields fell following soft service sector data.
The spread between the Chinese and U.S. sovereign 10-year yield was last quoted at 176 basis points, according to Refinitiv data.
Reference: CNBC, Reuters
Thai
Eng