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Dollar Up, Gains From Euro’s Fall as Focus Remains on Interest Rate Hike Timelines

Forex Nov 19, 2021 12:01AM ET
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© Reuters

By Gina Lee

Investing.com – The dollar was up on Friday morning in Asia, and is poised to post a second week of gains against the euro. The focus is now on when central banks will begin hiking interest rates in response to rising inflation.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged up 0.12% to 95.657 by 11:55 PM ET (4:55 AM GMT).

The USD/JPY pair inched up 0.10% to 114.36, with Japan’s national consumer price index (CPI) and national core CPI both growing 0.1% year-on-year in October.

The AUD/USD pair inched down 0.06% to 0.7275 and the NZD/USD pair inched up 0.02% to 0.7037.

The USD/CNY pair inched up 0.01% to 6.3856 while the GBP/USD pair inched down 0.01% to 1.3486. Bets that the Bank of England will hike interest rates in December are mounting as inflation rose to a 10-year high in October.

The euro fell 0.6% during the past week, boosting the dollar to a 16-month high. It last traded at 1.1372 after falling to $1.1263 earlier, but remains vulnerable as fundamentals and positioning swing to favor the dollar, according to investors.

"Previous post-global financial crisis occasions when the euro traded below $1.10 were accompanied by a big euro short position," Societe Generale (OTC:SCGLY) strategist Kit Juckes told Reuters.

"If the question is 'will the market now get very short euros' then I think the answer is that it will unless data improve dramatically."

Several central bankers, including European Central Bank President Christine Lagarde, Bank of England economist Huw Pill and the U.S. Federal Reserve’s Christopher Waller, Richard Clarida, and Mary Daly, will speak later in the day.

Bets are also rising on the Reserve Bank of New Zealand handing down a hawkish monetary policy that will hike the interest rate by 50 basis points (bps) when it meets next week.

"Rates markets remain skittish and the data pushed the bellwether two-year swap to a new high for the year, and that in turn, put the bid in behind the kiwi," ANZ Bank analysts said in a note.

"With 36 bps of hikes priced in for next week and 198 bps priced in over the next eight meetings, local markets could be setting themselves up for some real disappointment if we 'only' get a 25-bps hike, as we expect,” the note added.

Dollar Up, Gains From Euro’s Fall as Focus Remains on Interest Rate Hike Timelines
 

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