Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Dollar edges lower vs euro on ECB rate hike bets

Economy Jan 23, 2023 03:31PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: U.S. Dollar and Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
 
NG
+1.45%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Saqib Iqbal Ahmed and Samuel Indyk

NEW YORK (Reuters) - The dollar slipped against the euro on Monday, at one point hitting a fresh 9-month low, as the common currency found support from European Central Bank officials' comments signalling additional jumbo interest rate rises in Europe.

The euro reached as high as $1.0927, to trade at its highest level since April last year, before paring gains to trade up 0.05% at $1.08605.

The euro's early gains were aided by comments from European Central Bank (ECB) governing council members Klaas Knot and Peter Kazimir, who both advocated for two more 50 basis point hikes at meetings in February and March.

The ECB will keep raising interest rates quickly to slow inflation which remains far too high, ECB President Christine Lagarde said on Monday, largely repeating the bank's most recent policy guidance.

A Reuters survey of analysts also favoured hikes of 50 basis points at the next two meetings and an eventual rate peak of 3.25%, from the current rate of 2%.

"Really what's driving things is central bank policy divergence," said Joe Manimbo, senior market analyst at Convera in Washington.

"At least in the current cycle, the market thinks the Fed's most hawkish days are behind it. So when you weigh the outlook for central bank policy, it depicts the dollar at a disadvantage, given market bets on the Fed moving more slowly than its counterparts abroad," Manimbo said.

Fed fund futures have priced out almost any chance the Fed could move by 50 basis points next month and have steadily lowered the likely peak for rates to 4.75% to 5.0%, from the current 4.25% to 4.50%.

With monetary policy meetings for both the Federal Reserve and ECB set for next week, major currency pairs stuck close to familiar ranges on Monday.

The euro was also being supported by an easing of recession fears amid a fall in natural gas prices, according to Rabobank head of currency strategy Jane Foley.

"The growth in confidence in the economic outlook, or at least the removal of a lot of the pessimism, is part of the euro story," Foley said.

The dollar, which has risen against the yen after the Bank of Japan (BOJ) defied market pressure to reverse its ultra-easy bond control policy last week, was up 0.83% at 130.67 yen, following last week's wild gyrations between 127.22 and 131.58.

"The Bank of Japan, this month, signalling a hesitancy to turn hawkish has really taken some steam out of the yen's rebound," Manimbo said.

Analysts assume the BOJ will stand the line until at least the next policy meeting in March, though one hurdle will be the expected naming of a new BOJ governor in February.

Sterling retreated on Monday from a seven-month high against the dollar hit in Asian hours, having been helped last week by data showing the British economy was performing better than feared, which also drove expectations of more interest rate hikes. The pound was down 0.25% to $1.23685.

Meanwhile, bitcoin was little changed on the day at $22,849, steadying after having jumped by about a third in value since early January, as investors shook off pessimism following the high-profile collapse of the FTX crypto exchange FTX.

Dollar edges lower vs euro on ECB rate hike bets
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other 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, don’t trash it.

  •           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. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. 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.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

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 (1)
Warm Camp
Warm Camp Jan 22, 2023 7:39PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Commodity-related equities are the best choices in dollar-declining environment.
 
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
Continue with Google
or
Sign up with Email