The Dollar Is Reversing Its Recent Advances

Following recent strong gains, the dollar index sank to a record low in two weeks. Investors became worried ahead of U.S. inflation data, and central banks outside the U.S. appeared increasingly hawkish.

The euro rose versus the dollar as European Central Bank officials argued for more aggressive monetary tightening.

Strategists will eagerly watch the release of the monthly U.S. consumer price index report on Tuesday for signs of how aggressive the Federal Reserve may need to raise interest rates next week to combat excessive inflation.

On Monday, crude oil and gasoline finished slightly higher. Crude oil prices rose after OPEC+ agreed last Monday to decrease crude production by 100,000 BPD in October, the first cut in supply in more than a year.

The dollar index measures the dollar against six major rivals. It has been rising in anticipation of a more aggressive Fed, reaching a two-decade high of 110.79 last Wednesday. It dropped to 0.4% on Monday at 108.31, falling to its lowest level since August 26. Inflation expectations fell further in August as gasoline prices declined from June’s record high. This development is likely to relieve U.S. central bank officials concerned that the highest inflation in 40 years may change consumers’ perceptions of how sticky the current price shocks may be.

Currencies

The euro soared to its highest level versus the dollar since August 17. Last week, it touched a 20-year low of $0.9862. The euro was last trading at $1.0127, up 0.73%.

Policymakers at the European Central Bank perceive increasing chances that the central bank may need to raise its benchmark interest rate to 2% or higher to combat the eurozone’s record inflation.

The Australian dollar rose 0.61% to $0.6463.

Bitcoin is currently up 2.69% to $22,412.00, while Ethereum is down 2.31% to $1,728.