Dollar found support as investors wait for US inflation data
The dollar found support on Tuesday as investors looked to U.S. inflation data due later in the week. Remarkably, softer-than-anticipated jobs data eased but did not dispel concerns about early tapering of the Federal Reserve’s monetary stimulus.
The euro traded at $1.2178, a bounce back from a three-week low of $1.2104 set on Friday. However, it is slightly below its 20-day moving average.
The dollar also edged back through its 20-DMA against the yen and increased 0.15% to 109.42 yen.
Additionally, the U.S. dollar’s index against a basket of six major currencies traded at 90.059, close to a 4 1/2-month low of 89.533 hit late last month.
According to Philip Wee, an FX strategist at Singapore’s DBS Bank, worries remain that the Fed may start discussing tapering asset purchases at next week’s FOMC meeting. Meanwhile, U.S.Treasury Secretary Janet Yellen announced that higher U.S.interest rates would be good for the economy.
Friday’s jobs data eased concern about the Fed acting soon.
Friday’s jobs data, which revealed U.S. non-farm payrolls rising by 559,000 in May, came in below expectations and eased concern about the Fed acting soon.
The data helped to pin down U.S. bond yields near their recent lows, declining the dollar. Meanwhile, investors now looked to consumer price data on Thursday for fresh direction. However, nerves about strong readings are also giving the greenback some underlying support.
Many investors now anticipate the Fed to announce a plan to reduce its bond-purchase later this year, and actual tapering to start early next year.
The British sterling dropped 0.1% to $1.4157, and the Australian dollar eased slightly to $0.77444.
Remarkably, implied volatilities on both currencies have declined to their lowest levels since early 2020, before markets were hit by the coronavirus pandemic.
In cryptocurrency markets, the world’s largest cryptocurrency, Bitcoin, declined by 2% to a three-week low of $32,418. Meanwhile, the second-largest cryptocurrency, Ether, dropped 4% to a one-week low of $2,431.93.
