The dollar continues its losses amid risk appetite before the announcement of inflation figures
The dollar extended its losses on Monday as appetite for riskier assets continued to be strong ahead of the release of new US inflation data and the results of the midterm elections.
The Bloomberg Currency Index fell 0.4% in New York after rising as much as 0.5% earlier, after risk appetite negatively affected demand for the greenback as a safe haven.
The currencies of most emerging markets rose during the day, while the British Pound, Swiss Franc and Euro were among the biggest gainers in the currencies of the G-10 member countries.
Wall Street sees betting on the fall of the king dollar as premature
US Treasury bonds also fell, erasing their first gains and heading to the downside, amid an influx of corporate bond issues. US Treasury yields rose last week due to higher-than-expected employment figures and Federal Reserve Chairman Jerome Powell's comments that tightening monetary policy will continue as long as inflation continues to rise.
Jerome Powell: The picture is blurry and talk of a rate cut is premature
Risk appetite
“News that could have been significantly positive for the dollar a few months ago seems to have a marginal effect now,” Steve Englander, head of G10 currency research at Standard Chartered Bank, said in a note on Monday, adding that it indicated “ The continued strength of the dollar needs a large group of strong news supporting the US currency.
Riskier assets saw investor appetite on Monday even after China reiterated its commitment to its zero Covid policy last Saturday. Speculation that the Asian country might abandon this policy fueled investors' appetite for risk on Friday, pushing the dollar to its worst one-day drop since March 2020. In addition to the results of the midterm elections in the United States, the markets' attention is also directed to the consumer price numbers in the United States. Next Thursday.
“China was very clear at the weekend when they announced that the easing of lockdowns would not happen, and only the strength of the labor market gives the green light to the US Federal Reserve,” said Tim Baker, head of macroeconomic research at Deutsche Bank in Sydney. to raise interest rates. Baker added that the rise in inflation numbers "may lead to an increase in the interest rate increase in December until it approaches 75 basis points, which may strengthen the dollar's position and harm stock and bond prices."
peak dollar
The debate is currently working on whether dollar prices have reached their peak after the recent Federal Reserve decisions to raise interest rates, and that its fate is now at stake, as dealers scrutinize economic indicators numbers with the aim of forming a clearer picture about the future of US monetary policy.
Some institutional investors, such as M&G Investments, are becoming more wary of the Fed's path to hike interest rates and are reducing their long-term bets on the greenback.
Federal policy makers estimate the final interest rate to exceed 5%.
And TD Securities said that pressures towards rising dollar prices may begin to recede as the currency's sensitivity to raising interest rates decreases, although other companies, including the Commonwealth Bank of Australia, believe that investors should not be excluded. The dollar is now rising.
"A peak in Fed interest rates could lead to a widening of interest differentials between the United States and its most important trading partners, which will support the dollar," the bank's analysts, including Carol Kong, wrote in a note.
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