FOREX-Greenback bounces off six-week low as merchants put together for Powell

* Greenback briefly hits lowest since Jan. 13

* , maintain close to multi-year highs

* takes one other dive after document value

* Graphic: World FX charges https://tmsnrt.rs/2RBWI5E (Provides chart, new quote, newest costs)

By Tommy Wilkes

LONDON, Feb 23 (Reuters) – The greenback rebounded off six-week lows on Tuesday as traders’ focus shifted to how U.S. Federal Reserve chief Jerome Powell may reply to resurgent inflation expectations, whereas commodity-linked currencies hovered close to multi-year highs.

The current rise in inflation expectations as traders wager on a post-pandemic financial restoration and the so-called “reflation” commerce has lifted U.S. authorities bond yields. That had fed by way of to a better greenback till earlier this month when the buck resumed its decline.

Analysts anticipate Powell, who testifies earlier than Congress at 1500 GMT, to supply some reassurance that the Fed will tolerate greater inflation with out dashing to lift charges. That may calm bond markets and ultimately weigh on the greenback, they stated.

“Mr. Powell will very doubtless reiterate that the Fed is a great distance from assembly its targets and that it’s going to doubtless take a while earlier than “ample progress” has been made to taper its bond buy program,” UniCredit analysts stated.

The greenback index was final at 90.143 =USD , up 0.1% on the day, having earlier fallen to 89.941, its weakest since Jan. 13.

Positioning knowledge exhibits traders overwhelmingly betting {that a} U.S. greenback, which has been dropping since final March, will preserve falling because the world recovers from the COVID-19 pandemic. 0#NETUSDFX

“Solely when the spike in U.S. yields turns into extra disorderly and spills forcefully into danger property, would U.S. greenback expertise an across-the-board energy,” stated ING analysts in a analysis word.

The euro weakened 0.1% to $1.2151 . Euro zone authorities bond yields have additionally been rising however the rally took a quick pause after European Central Financial institution President Christine Lagarde stated on Monday the financial institution was “intently monitoring” rising borrowing prices.

Commodity-linked currencies have been among the many greatest performers in 2021. Surging costs for supplies from oil and to lumber and milk powder have pushed currencies such because the Canadian, Australian and New Zealand {dollars} to their highest in roughly three years.

On Tuesday, the Aussie traded down 0.2% at $0.7903 AUD=D3 having earlier hit a excessive of $0.7934. The New Zealand greenback was down marginally NZD=D3 whereas the Canadian greenback was slightly below its Monday excessive CAD=D3 .

Sterling hit a brand new practically three-year excessive of $1.4098 GBP=D3 , up 0.3% on the day, as traders caught with their bets {that a} speedy rollout of the COVID-19 vaccine would permit the British financial system to reopen over the subsequent few months.

Prime Minister Boris Johnson laid out his step-by-step plan for ending the present British lockdown on Monday.

Bitcoin, the world’s greatest cryptocurrency, fell sharply under $45,000 and was final down 15% at $45,953, extending its drop from a document set on Sunday of $58,354 as traders develop nervous about sky-high valuations. Japanese yen , the worst performing main foreign money of 2021 as a result of rising U.S. Treasury yields can lure funding from Japan, fell once more. The greenback was final up 0.2% at 105.26 yen per greenback.

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