In the News

Dollar Climbs to Six-Week High Against Euro Ahead of ECB Meeting

(Bloomberg) - The dollar gained against all of its developed-economy peers as markets assess the number of rate cuts central banks around the globe will make this year relative to the Federal Reserve.

  • Euro may fall to $1.07 ahead of rate decision: Monex
  • Greenback advances against all of its peers in the Group of 10

The Bloomberg dollar index rose as much as 0.3%, advancing for a second day. The euro lost the most against the greenback on Tuesday as traders unraveled long positions ahead of a euro-area Purchasing Managers Index report and the European Central Bank decision later this week.

“Markets see it as increasingly likely that PMIs for the Eurozone will continue to show an economy in contraction, and the ECB’s hand may be forced sooner than the Fed in response,” according to Helen Given, an FX spot trader at Monex USA. By contrast, many investors believe the US can avoid a recession while also taming inflation as data shows continued resiliency in the US economy. Given said the euro could temporarily weaken to $1.07. 

The euro fell as much as 0.6% against the dollar to 1.0822 on Tuesday, falling below its 200-day moving average. It also touched the lowest since September against the British pound.

The common currency was weighed down by weakness in Emerging European currencies and currency position adjustments after a report that China was seeking a 2 trillion yuan ($278 billion) stock rescue package that would tap offshore accounts of Chinese state-owned enterprises.

The yen lost 0.3% in value to the dollar, after advancing as much as 0.8% as Bank of Japan Governor Kazuo Ueda spoke at a press conference. The BOJ’s slightly more hawkish tone provided just a brief boost to the yen, while leaving the timing of a policy shift uncertain.

“They were dovish if anything, and the market is looking for any sliver of hope they might hike in April still,” Brad Bechtel, global head of foreign exchange at Jefferies. “You can keep the yen as your primary funding currency, that will not change over the course of this year or next.”

The yen has lost more than 5% against the dollar so far this year.

 

Reporting By Anya Andrianova and Robert Fullem, edited by Edward Harrison
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