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

Dollar Edges Higher; Tone Negative as Fed Remains Cautious

ForexApr 12, 2021 03:01AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

By Peter Nurse - The dollar edged higher in early European trading Monday, but still traded near 2-1/2-week lows as the recent decline in Treasury yields undercut support for it. 

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 92.248, after falling below 92 late last week for the first time since March 23.

USD/JPY fell 0.1% at 109.57, EUR/USD dropped 0.1% to 1.1887, GBP/USD fell 0.1% to 1.3705, while the risk-sensitive AUD/USD fell 0.2% to 0.76095.

Federal Reserve Chair Jerome Powell continued the mantra Sunday that near-term price pressures will prove transitory, and the central bank’s ultra-easy monetary policies were here to stay.

He added the U.S. economy is at an "inflection point" with expectations that growth and hiring will pick up speed in the months ahead, but also noted risks that a hasty reopening could lead to a continued increase in coronavirus cases.

This insistence that monetary support is not going to disappear shortly has resulted in the greenback and bond yields weakening after scaling multi-month peaks at the end of last month, powered by expectations the Fed would have to move as an accelerating U.S. recovery from the pandemic lifts inflation faster than expected.

The benchmark 10-year Treasury yield was at 1.65%, considerably below the  more than one-year high of over 1.77% seen at the end of March, even after Friday’s stronger-than-expected producer price data.

“By the start of this year it did look fairly obvious that consensus would need to hike U.S. growth forecasts massively following i) fiscal divergence, ii) vaccination divergences and iii) a nice growth boost from previous dollar weakness,” said analysts at Nordea, in a note. “Now all of that ought to be priced-in to some extent, and more good (and ‘unexpected’) news may be needed to propel yields – or the dollar higher.”

More U.S. data will be released during the week, including the consumer price index on Tuesday, the Fed’s Beige Book on Wednesday, and retail sales as well as industrial production data on Thursday.

Elsewhere, USD/TRY rose 0.4% to 8.1882 ahead of Turkey’s latest current account data, with pressure on the lira set to mount.

President Recep Tayyip Erdogan fired the head of the central bank late last month after he lifted interest rates sharply to protect the currency. The new governor, Sahap Kavcioglu, has pledged to deliver price stability, but it’s difficult to see how he can achieve this with Erdogan expecting interest rates to head lower at some point.

During the lira’s last bout of weakness last year, Turkey spent more than $100 billion of foreign reserves to support the currency, according to a report by Goldman Sachs (NYSE:GS), and thus the current account data will be studied carefully.

USD/INR rose 0.2% to 74.843, with the rupee hitting an eight-month low overnight as India overtook Brazil to become the second most-affected country in the world.

Indian CPI and industrial production data, due late Monday, will be studied carefully to gauge the impact on the country.

Also, USD/RUB rose 0.3% to 77.614, with a buildup of Russian forces near the border between Ukraine and Russia fueling concerns that Moscow is preparing to send forces into Ukraine again, which could result in further sanctions from the West.


Dollar Edges Higher; Tone Negative as Fed Remains Cautious

Related Articles

Dollar Edges Lower; April Payrolls Data in Focus
Dollar Edges Lower; April Payrolls Data in Focus By - May 07, 2021

By Peter Nurse - The dollar edged lower in early European trade Friday, under modest pressure ahead of the monthly U.S. employment report which is expected to firm up...

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’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
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.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
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'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
Sign up with Email