Mar 28 2024: On Thursday, the dollar saw an uptick against the euro following comments from a U.S. Federal Reserve policymaker indicating a reluctance to cut rates. Traders also adjusted their positions ahead of key U.S. economic data scheduled for release on Friday, as well as for month- and quarter-end rebalancing.
Fed Governor Christopher Waller’s remarks on Wednesday, emphasizing the case for maintaining the current short-term interest rate target due to disappointing inflation data, injected momentum into the market. This sentiment, coupled with expectations for upcoming economic indicators, influenced currency movements.
Market expectations regarding the timing of the first rate cut by the Fed have eased, with current pricing indicating a 64% chance of a rate cut at the June meeting, compared to 70% previously. Analysts noted that although inflation in January and February exceeded expectations, March’s data is unlikely to follow suit, leading to a stable rate cut projection by the Fed.
The euro slipped to $1.0775, its lowest level in five weeks, and was last down 0.16% at $1.0809. Meanwhile, the pound strengthened marginally to $1.264.
The dollar index initially rose to 104.73, its highest since mid-February, before settling at 104.37, down 0.05%.
Analysts anticipated potential portfolio rebalancing activities towards the end of the month and quarter, which could impact the dollar’s performance.
Concerns about intervention in the currency market were raised, particularly regarding the yen’s vulnerability if inflation data supports the dollar. Japanese authorities have expressed readiness to intervene if necessary, with attention focused on any signals indicating actual intervention actions.
Light trading volumes due to the Good Friday holiday added to market volatility. Chinese efforts to stabilize the yuan were noted, with the onshore yuan remaining relatively steady and the offshore yuan slightly weaker.
In other markets, the Australian dollar weakened following Waller’s comments and lower-than-expected retail sales data from Australia. Bitcoin experienced a 2.93% increase, reaching $70,888.00.
