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Dollar Inches Down but “Regains Mojo” as Fed Deflects Early Interest Hike Hopes

ForexMar 19, 2021 12:08AM ET
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By Gina Lee

Investing.com – The dollar inched down on Friday morning in Asia but was boosted by rising Treasury yields and a fall in global shares. Investors also continue to contemplate the U.S. Federal Reserve’s deflection of early interest-rate hike expectations.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.01 at 91.862 by 11:59 AM ET (3:59 AM GMT).

The USD/JPY pair inched up 0.01% to 108.89.

The AUD/USD pair edged down 0.18% to 0.7742 and the NZD/USD pair inched up 0.01% to 0.7166.

The USD/CNY pair edged up 0.13% to 6.5136 and the GBP/USD pair inched down 0.03% to 1.3916.

The benchmark U.S. 10-year yield climbed to a more than one-year peak of 1.754% during the previous session before dropping to 1.715%. The Fed handed down its policy decision on Wednesday and pledged to carry on with aggressive monetary stimulus.

“After some navel-gazing,” bond investors “concluded that the Fed is not [posing] any challenges or discomfort for longer-dated UST yields to keep pushing higher,” National Australia Bank (OTC:NABZY) senior FX strategist Rodrigo Catril said in a note.

“The USD regained its mojo,” the note added.

Rounding up a week of central bank policy decisions, the Bank of Japan (BOJ) handed down its own decision earlier in the day. BOJ also announced the results of a comprehensive policy review and was expected to slightly widen the implicit band in which it allows long-term interest rates to move around its 0% target.

The Bank of England (BOE) handed down its decision the day before. It also warned that the outlook for U.K.’s recovery from COVID-19 remained unclear, which disappointed expectations that BOE would signal a more confident outlook.

Elsewhere in Europe, several countries, including Germany and France, plan to resume usage of the AstraZeneca (NASDAQ:AZN) PLC/University of Oxford COVID-19 vaccine. The European Medicines Agency (EMA)’s endorsement of the vaccine on Thursday to calm jitters over potential side effects is set to give the continent's COVID-19 vaccination rollout a boost.

However, a third wave of COVID-19 cases in France saw Paris and other parts of the country enter a fresh lockdown, dampening investor sentiment. The euro slipped 0.1%, extending Thursday’s 0.5% drop.

In cryptocurrencies, bitcoin weakened to around $56,703 as the Asian trading session got underway, after briefly surpassing the $60,000 mark during the previous session. It had climbed to a fresh record high of $61,781.83 during the previous week, after more than doubling since the start of 2021.

“Bitcoin is a momentum trade, and it feels like it could go a lot further... is it a bubble? Yes. But it can easily go to $100,000 before it comes crashing down,” OANDA senior market analyst Edward Moya told Reuters.

Dollar Inches Down but “Regains Mojo” as Fed Deflects Early Interest Hike Hopes
 

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