US dollar stuck at multi-month low as Fed dovishly tumbles; euro rises

The US dollar has been stuck at a multi-month low as the Fed tumbles dovishly;  the euro increases

Business News: US dollar stuck at multi-month low as Fed dovishly tumbles; euro rises.

The dollar stuck at its weakest point since early January against its major industry counterparts on Wednesday as Treasury bond yields fell after the Federal Reserve argued that stimulus measures will continue despite current inflationary pressures .

The EUR = EBS euro traded around the key level of $ 1.2250, maintaining Tuesday’s gains as it climbed to $ 1.2266 for the first time since Jan 8 as the pandemic recovery in Europe picks up momentum and closes the gap with the United States.

The dollar = USD index, which measures the greenback against six rivals, languished at 89.663 at the start of the Asian session, after hitting a bottom at 89.533 on Tuesday.

The central bank should leave rates on hold, update economic forecasts and remain “patient” on policy, but it is unlikely to say anything positive for the currency.

A host of Fed officials overnight echoed President Jerome Powell’s sentiments that a spike in inflation will be transitory and that ultra-easy politics will continue to be justified.

“I haven’t seen anything yet to persuade me to change my full support for our accommodative stance,” Chicago Fed Chairman Charles Evans said in a speech Tuesday.

The JPY = EBS yen, which is also sensitive to falling yields, hovered around the middle of its trading range of around 108.4-109.7 per dollar this month, last changing hands at 108, 75.

The Chinese yuan strengthened to 6.3925 per dollar in offshore trading on Tuesday, breaking the psychological limit of 6.4 for the first time since mid-2018.

China’s major state-owned banks were seen buying US dollars at around 6.4 yuan in the Asian afternoon in a move seen as an effort to cool the onshore yuan rally, the sources said.

“Between conflicting relationships from Chinese officials in recent days regarding their attitude towards the currency, our reading here is that 6.40 is not a hard line in the sand and that, in the context of further downward pressure on the USD more broadly, it will be “permission” to trade lower, “National Australia Bank strategist Ray Attrill wrote in a report, reiterating a forecast of 6.35 yuan per dollar by the end of June.

The JPY = EBS yen, which is also sensitive to falling yields, hovered around the middle of its trading range of around 108.4-109.7 per dollar this month, last changing hands at 108, 75.

The Chinese yuan strengthened to 6.3925 per dollar in offshore trading on Tuesday, breaking the psychological limit of 6.4 for the first time since mid-2018.

China’s major state-owned banks were seen buying US dollars at around 6.4 yuan in the Asian afternoon in a move seen as an effort to cool the onshore yuan rally, the sources said.

“Between conflicting relationships from Chinese officials in recent days regarding their attitude towards the currency, our reading here is that 6.40 is not a hard line in the sand and that, in the context of further downward pressure on the USD more broadly, it will be “permission” to trade lower, “National Australia Bank strategist Ray Attrill wrote in a report, reiterating a forecast of 6.35 yuan per dollar by the end of June.