Dollar falls on expectations US rates will stay low for longer
American dollar banknotes.
Liu Jie | Xinhua via Getty
The dollar has hit a six-year low against the Canadian dollar and swung near multi-month lows against European currencies, as renewed expectations that the United States will not raise interest rates anytime soon. .
Dallas Federal Reserve Chairman Robert Kaplan on Monday reiterated his view that he does not expect an interest rate hike until next year, fueling a further drop in bets on the fact that inflationary pressure could force the Fed to act sooner.
This week, a host of Fed policymakers are scheduled to speak, and the US central bank will also release the minutes of its last meeting, which could provide some hints on the direction of monetary policy this year.
However, the growing consensus is that the Fed will tolerate what it sees as a temporary acceleration in inflation, which will keep the dollar lower against most major currencies.
“The most important point is where the returns are going,” said Junichi Ishikawa, senior currency strategist at IG Securities. “Yields are capped, reflecting expectations that US monetary policy will remain easy,” Ishikawa added.
“This puts the dollar under downward pressure.”
Against the euro, the dollar traded at $ 1.2167, close to the weakest since February 26.
The British pound rose to $ 1.4174 to hit its strongest since late February.
The pound has been strong recently as investors applaud the gradual lifting of strict coronavirus restrictions.
The Canadian dollar rose to a six-year high of C $ 1.2045 against the greenback, helped by higher oil prices.
The dollar was stable at 109.16 yen. The currency pair was stuck in a narrow range amid concerns over slow vaccinations in Japan and the weakness of the greenback.
The yen fell against the British pound and Antipodes currencies after data showed the Japanese economy contracted more than expected due to coronavirus infections.
Some investors were already lowering expectations of a Fed rate hike this year, and Kaplan’s comments prompted traders to sell the dollar even more.
The onshore yuan edged up to 6.4332 to the dollar, not far from an almost three-year high reached last week.
The Australian and New Zealand dollars also rose against their US counterparts.
In the cryptocurrency market, bitcoin rose 2.91% to $ 44,860, but was still near a three-month low amid doubts over the enthusiasm of Tesla boss Elon Musk for digital asset.
The ether of the rival digital currency edged up to $ 3,390, after a two-week low hit on Monday.