Dollar slumps to multi-month lows as expectations of flat rates cement

imageEconomy3 hours ago (May 18, 2021 20:56)

© Reuters. FILE PHOTO: A picture illustration shows U.S. 100-dollar bank notes taken in Tokyo August 2, 2011. REUTERS/Yuriko Nakao

By Stephen Culp

NEW YORK (Reuters) – The dollar dipped on Tuesday for the fourth straight session, reaching its lowest level against a basket of currencies since late February on waning fears that inflation spikes could prompt the Federal Reserve to raise interest rates sooner than anticipated.

U.S. Treasury yields stalled as investors grew more confident that the Fed will hold off on tightening its accommodative monetary policy, despite worrisome indicators that booming demand and scarce supply are sending prices soaring.

Those price increases have stoked fears of longer-term inflation, despite the central bank’s assurances that the spikes will be transitory.

“The market has come around to the Fed’s expectation that inflation is set to rise over near term but will plateau and decline in the coming months,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

“The perception is the Fed could lag other central banks in normalizing its policies.”

Several 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, all of which will be parsed for any signs of a shift in its economic outlook.

“As long as the Fed maintains this very dovish policy stance, that’s going to leave the dollar vulnerable,” Manimbo added. “Having said that, the Fed signaling a change in course might not be that long in the offing if we see strong data, especially in the job market and inflation.”

The dollar index was last down 0.48% at 89.747.

The progress of COVID-19 vaccine deployment and easing of measures to contain the pandemic have lifted higher-risk currencies that stand to benefit most from economic revival.

For an interactive graphic on worldwide vaccine rollout and access, click here

The euro gained 0.63% to $1.223, passing its highest level since Feb. 25, and the dollar fell 0.25% to 108.89 Japanese yen.

The British pound, buoyed by the lifting of COVID-19 restrictions, passed the $1.42 level for the first time since Feb. 24. [GBP/]

“It’s a good day for the pound,” Manimbo said. “The Bank of England has upgraded outlook for the UK economy and the pound is starting to bear the fruit of that. Britain’s strong vaccine rollout has pulled growth forward.”

(Graphic: Currencies and vaccination rates –

Rising oil prices supported the Norwegian crown and helped boost the Canadian dollar to a six-year high. [O/R]

Bitcoin dipped 1.9% to a more than three-month low, extending its slide after Tesla Inc boss Elon Musk dampened enthusiasm for the cryptocurrency over the weekend.

Rival digital currency ether rose 2.48% to $3,363.

Dollar slides to 2-1/2 month low as Fed rate hike fears subside

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.


Please enter your comment!
Please enter your name here