- Graphic: World Currency Rates https://tmsnrt.rs/2RBWI5E
LONDON, June 21 (Reuters) – The dollar weakened against major currencies on Monday but broadly held up the previous week’s gains following the surprisingly restrictive tilt from the Fed.
The dollar index lost momentum after jumping 1.9% last week – the strongest since March 2020 – when the US Federal Reserve signaled an earlier than expected end to its ultra-loose monetary policy.
The index, which tracks the greenback against six major currencies, fell 0.2% to 92.074 from a high of 92.405 on Friday, a level not seen since April 13.
The Fed’s restrictive shift has since weighed on the markets, although risk sentiment improved somewhat on Monday, which is reflected in positive developments in European equity markets. Continue reading
Among the currencies that gained ground, the pound sterling was up 0.6% to $ 1.3877 after losing more than 2% against the dollar the previous week.
The euro also rose by around a quarter to 1.18960 US dollars. The yen was last up 0.2% and lost some previous gains. ,
“The Fed’s restrictive policy has abruptly ended the recent period of low volatility and tight trading ranges for G10 FX,” MUFG currency analysts said in a press release.
“The Fed has encouraged market participants to price in further rate hikes for the next year and raise US short rates and the USD.”
The Fed’s monetary stance has created a tailwind for the dollar and will pose a challenge to risk assets, Westpac analysts said.
While the dollar index may test the highs it hit in March after its recent gains, “there isn’t enough juice for a sustained medium-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 policies if their economies recover from the blow of the pandemic.
In cryptocurrencies, Bitcoin’s poor recent run continued, falling 8% below $ 33,000 as China extended mining restrictions to Sichuan Province. Continue reading
Cryptomining is big business in China and accounts for more than half of the world’s bitcoin production.
Reporting by Iain Withers, additional reporting by Hideyuki Sano in Tokyo, editing by Catherine Evans
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