As bleak U.S. corporate results season fueled recession fears and traders remained on guard ahead of a flurry of C.Bank meetings next week, the dollar languished near an eight-month low against its rivals on Thursday.
The U.S. dollar index, which compares the value of the dollar to a basket of other currencies, last stood at 101.53, not far from the eight-month low reached last week of 101.51.
Due to Australia being on vacation and several regions of Asia still being away for the Lunar New Year, trading was light on Thursday.
Investors have reduced their estimates for how long the Federal Reserve will need to rapidly raise interest rates as a result of disappointing profits and outlook from U.S. corporates and a wave of layoffs in the tech industry.
The U.S. economy “may be slowing in a more serious manner,” according to Wells Fargo researchers.
We currently think that the U.S. dollar has entered a period of cyclical depreciation against the majority of other currencies since the Fed is no longer leading the charge on interest rate hikes and because U.S. economic trends are expected to weaken.
Next week, the Fed’s policy-making committee will begin a two-day meeting, and the markets have priced in an interest rate increase of 25 basis points, a reduction from the 50 and 75 basis point increases the Fed made last year.
Markets anticipate rate increases of 50 basis points from the European Central Bank (ECB) and Bank of England policymakers, who will both meet next week. The ECB is predicted to continue being hawkish.
The euro increased 0.05% to $1.0920, flirting with its nine-month high of $1.0927 set on Monday, while the sterling recently moved up 0.12% to $1.2415.
Euro does attract a lot of attention, according to Kiwibank Chief Economist Jarrod Kerr. “The energy crisis that people were expecting hasn’t exactly played out,” according to the Eurozone.
The Canadian dollar last exchanged hands at 1.3393 to the US dollar in other markets after the Bank of Canada raised its benchmark interest rate to 4.5% on Wednesday but became the first significant C.Bank battling global inflation to announce it would likely delay further increases for the time being.
The Australian dollar increased 0.06% to $0.7107 after surging 0.8% on Wednesday in response to shocking data that showed Australian inflation had soared to a 33-year high in the previous quarter, supporting the Reserve Bank of Australia’s decision to increase interest rates again next month.
The New Zealand dollar held steady at $0.6480 after falling by 0.43% the previous day as the annual inflation rate for the fourth quarter of that country was lower than expected by the C.Bank.
The Japanese yen increased 0.3% to 129.21 per dollar in Asia.
A report of the discussions among policymakers at the Bank of Japan (BOJ) meeting in January revealed that several of them cautioned that it would take some time before wages increase sustainably.
In order to keep the 10-year bond yield from exceeding its new 0.5% threshold, the BOJ strengthened a tool used in its monetary policy at that meeting while maintaining ultra-low interest rates. Its move went against market expectations for more monetary policy adjustments.