The dollar extended its slide on Tuesday, touching its lowest level since late February, as increased risk appetite lured investors away from the safe-haven greenback.
U.S. Treasury yields stalled as market participants grew increasingly confident that the Federal Reserve will hold off on hiking interest rates for the time being, despite worrisome near-term inflation spikes.
“We’re seeing this dollar weakness against numerous pairs and the market is starting to believe the Fed that we’re going to have low interest rates a lot longer,” said Edward Moya, senior market analyst at OANDA in New York.
“That’s going to be bearish for the dollar. You’ll eventually see commodity-based currencies outperforming,” Moya added.
A spate of Fed policymakers are expected to speak this week and the U.S. central bank is due to release the minutes from its April policy meeting on Wednesday, which will be parsed for any signs of a shift in its economic outlook and monetary policy.
“Normally everyone gets excited for the Fed minutes, but these minutes are old,” Moya said. “We had a disappointing payrolls report and very hot CPI and PPI that happened after the meeting, most are focused on the raft of (Fed) speakers.”
The dollar index was last down 0.41% at 89.799.
The progress of COVID-19 vaccine deployment and easing of measures to contain the pandemic has lifted higher-risk currencies that stand to benefit most from economic revival.
For an interactive graphic on worldwide vaccine rollout and access, click here https://graphics.reuters.com/world-coronavirus-tracker-and-maps/vaccination-rollout-and-access.
The euro gained 0.51% to $1.2214, passing its highest level since Feb. 25, and the dollar fell 0.24% to 108.935 Japanese yen.
The British pound, buoyed by the lifting of COVID-19 restrictions, rose past the $1.42 level for the first time since Feb. 24. [GBP/]
“What really has helped the pound is reopening momentum and willingness to become vaccinated,” Moya said. “It’s suggesting (the UK) recovery is going to stick. They’re finally getting on the other side of Brexit.”
Rising oil prices supported the Norwegian crown and helped boost the Canadian dollar to a six-year high. [O/R]
Rival digital currency ether jumped 3.62% to $3,404.
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