Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Dollar holds gains, looks to Powell's speech for direction

Published 08/23/2020, 08:41 PM
Updated 08/24/2020, 02:05 AM
© Reuters. FILE PHOTO: A U.S. Dollar banknote

By Stanley White

TOKYO (Reuters) - The dollar steadied against major currencies on Monday as traders looked to more data for a gauge on the health of the global economy and the Federal Reserve's annual Jackson Hole retreat for guidance on the outlook for U.S. monetary policy.

Sentiment for the greenback has improved somewhat due to supportive data on business activity and home sales, but there are still concerns that additional monetary easing may be necessary to keep economic growth on track.

Currencies showed little reaction to U.S. authorization of a coronavirus treatment that uses blood plasma from recovered patients as many investors are waiting for definitive news of a credible vaccine.

Traders in the yuan, and across the broader financial markets, are also nervously watching Sino-U.S. ties as President Donald Trump's wide-ranging diplomatic dispute with China shows no signs of abating.

"There could be a short-term bounce in the dollar, especially against the euro," said Junichi Ishikawa, senior foreign exchange strategist at IG Securities in Tokyo.

"In the long term, the dollar will resume its decline because the Fed has to commit to aggressive easing for an very long time."

Against the euro (EUR=D3), the dollar held steady at $1.1795, clinging onto gains made late last week.

The British pound bought $1.3092 and traded at 90.11 pence per euro (EURGBP=D3).

The greenback fetched 0.9126 Swiss franc , holding onto a 0.5% gain from Friday.

The yen held steady, with the dollar changing hands at 105.87 yen , showing little reaction after Japanese Prime Minister Shinzo Abe entered hospital on Monday amid speculation about his health.

Federal Reserve Chairman Jerome Powell will discuss monetary policy on Thursday at the opening day of the Kansas City Fed's annual symposium.

This year the meeting will be held online, and not at the hunting and fishing resort of Jackson Hole, Wyoming because of the coronavirus pandemic.

The quantitative easing that the Fed has deployed so far has flooded financial markets with excess liquidity and weighed on the dollar.

Last week the dollar index (=USD) against a basket of six major currencies fell to the lowest in more than two years. It was last trading at 93.218, little changed from Friday.

The world's policymakers have unleashed an unprecedented wave of monetary easing and fiscal support to offset the economic drag caused by the pandemic.

However, many countries are now battling a second wave of infections, which could further delay a full-fledged economic recovery.

As usual, investors will also be watching out for a further run of data this week for clues on the global economy, including a second estimate of U.S. GDP for the second quarter as well as weekly jobless claims and some second tier Asian indicators.

The euro was on the defensive following disappointing manufacturing and services sector data for Europe released on Friday.

The common currency's next major hurdle is the release of the closely-watched Ifo sentiment survey on Tuesday.

The euro has pulled back slightly from a two-year high versus the dollar reached last week, which makes it vulnerable to short-term profit taking, some analysts say.

Net short positions in the dollar declined from a more than nine-year high hit a week earlier, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday, which suggests that the greenback's declines could start to slow.

The speculative community has been short the U.S dollar since mid-March.

The onshore yuan traded at 6.9196, little changed on the day amid lingering doubts about frayed U.S.-China ties.

Trump on Sunday raised the possibility of decoupling the U.S. economy from China as part of a broad-ranging dispute with Beijing over China's role in global trade and advanced technology.

The Australian dollar held steady at $0.7165 after the state of Victoria reported its lowest daily rise in new coronavirus infections in seven weeks on Monday, fuelling optimism that a deadly second wave there is subsiding.

© Reuters. FILE PHOTO: A U.S. Dollar banknote

The New Zealand dollar was little changed at $0.6534 after the government extended a coronavirus lockdown in Auckland by four more days.

Latest comments

#TrainWreck  Skip the Train Wreck, Buy BTC!
"looks to Powell for direction". hahahahaha.  Powell is Homer at the reactor control panel. Eyes closed, pressing random buttons hoping the problem will fix itself.
“The speculative community has been short the U.S dollar since mid-March.”More on this speculative community please...
,,,,,
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.