Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Dollar hovers near 10-week lows as inflation expectations skyrocket

EconomyMay 10, 2021 03:52PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

By Kate Duguid

NEW YORK (Reuters) -The dollar languished at around 2-1/2 month lows on Monday as investors bet that rising inflation would erode the currency's value as the U.S. Federal Reserve maintains its loose monetary policy.

The five-year breakeven inflation rate - which measures expectations of inflation five years out - reached its highest since April 2011 on Monday. The 10-year breakeven inflation rate - a measure of expectations of inflation in 10 years time - rose to its highest since March 2013.

A weaker-than-expected jobs report on Friday helped persuade market participants that the Fed would keep rates low and continue purchasing assets, even if inflation rises. The United States created a little more than a quarter of the jobs that economists had forecast last month and the unemployment rate unexpectedly ticked higher.

"I think the biggest problem for the dollar right now is what's happening to real yields, which continue to tumble. We're seeing inflation breakevens continue to push higher," said Daniel Katzive, head of foreign exchange strategy North America at BNP Paribas (OTC:BNPQY). "This is creating a lot of vulnerability for the dollar."

In recent years, rising inflation expectations have helped the dollar because investors have assumed interest rates would be raised in response to higher prices.

The dollar index, which measures the greenback against six rivals, was last at 90.205, up 0.06% on the day, having earlier hit its lowest since Feb. 25.

The market this week will be focused on U.S. consumer price data reported Wednesday as well as retail sales on Friday. Wednesday's CPI data will show the state of inflation today, and while that may have some effect on the market, the higher breakeven rates seen Monday reflect broader bets that inflation will rise in the next several years.

"The Fed will let inflation run hot into 2023. I would be so shocked if the Fed hiked interest rates in 2022," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

The British pound was the biggest gainer among the G10 currencies, rallying as high as $1.416, the highest since Feb. 25. It was last up 1.02% at $1.413. This was despite Scotland's leader saying that another referendum on independence is inevitable after her party's resounding election victory.

Also benefiting was the Canadian dollar, which was 0.36% stronger on the day to $1.209, the highest since September 2017.

In cryptocurrencies, ether extended this month's record run, surging to an unprecedented $4,148.88. The second-biggest digital token has rallied 41% so far in May and was up 4.52% on Monday.

Dollar hovers near 10-week lows as inflation expectations skyrocket
 

Related Articles

Fed-fueled dollar rises as bears make for exits
Fed-fueled dollar rises as bears make for exits By Reuters - Jun 18, 2021 8

By Saqib Iqbal Ahmed and Julien Ponthus NEW YORK (Reuters) - The dollar extended its advance against a basket of currencies on Friday, building on the gains logged after the U.S....

Trust Dollar Rally for Now, But Bears Will Be Back
Trust Dollar Rally for Now, But Bears Will Be Back By Investing.com - Jun 18, 2021 2

By Yasin Ebrahim Investing.com – The dollar's sunny days are set to continue for quite a while, but the Fed's path will eventually turn murky again to bring the bears out of...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Haval Ahmed
Haval Ahmed May 10, 2021 7:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
NFP was the last trick to destroy US$
Jim Jones
Jim Jones May 10, 2021 5:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Not gonna get labor recovery until we stop paying people more to sit at home.
Catharine Varady
Catharine Varady May 10, 2021 5:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
many probably have gotten jobs yet keep claiming benefits by delaying report
Michael Cruz
Michael Cruz May 10, 2021 5:42AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Sorry nobody wants to take your crap for cents on the dollar. Pay people a living wage and stop making America run on desperation.
William Bailey
William Bailey May 10, 2021 1:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tax the tar outta the wealthy scofflaws
Mark Stallone
Mark Stallone May 10, 2021 1:59AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tax the tar outta the middle class. There. I fixed it for you. What's really going to happen).
Mark Stallone
Mark Stallone May 10, 2021 1:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Taxation is a much bigger threat than inflation.Bidens taking it to a whole new level.Buckle up.
Michael Cruz
Michael Cruz May 10, 2021 1:39AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nobody tell this guy that taxation offsets inflation. Youre in an investing forum.
femi victor
femi victor May 09, 2021 9:08PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
truly investing in Bitcoin is profitable
femi victor
femi victor May 09, 2021 8:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
wowthanks to expect Andrew MarshallI just got my profitindeed getting a professional broker is the key
kate mccarthy
kate mccarthy May 09, 2021 8:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
🤔🤔🤔 please I'll like to meet your broker I've lost a lot trading on my own
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
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.
Continue with Google
or
Sign up with Email