Dollar decline moderates as investors await Fed decision

The dollar fell against a basket of currencies on Monday, following its largest weekly decline of the year last week as Treasury yields plummeted, but remained above more than one-year lows reached on Friday in the absence of significant market-moving catalysts.

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As investors await next week’s Federal Reserve meeting, at which the U.S. central bank is expected to raise rates by 25 basis points, the dollar is likely to consolidate this week.

This week, the market should stabilize and the dollar should strengthen, according to Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, who noted that last week’s dollar depreciation appeared unusually rapid.

Tuesday’s June retail sales report will be the primary focus of the U.S. economy this week, although the data is unlikely to affect monetary policy.

In November, the Fed funds futures market is pricing in an additional 32 basis points of tightening, with the benchmark rate expected to crest at 5.40%. This implies that the market anticipates a low likelihood of additional interest rate hikes following the July 25-26 Fed meeting.

Yields on U.S. Treasuries fell significantly last week as sluggish consumer and producer price inflation in June increased expectations that price pressures will continue to ease, resulting in more dovish monetary policy.

“The U.S. disinflation shock last week altered the FX landscape, but a few days without key data releases will tell us whether that impulse can keep the dollar on the back foot as the FOMC risk event approaches,” said Francesco Pesole, FX strategist at ING.

“Euro/dollar appears a bit overstretched in the short term and could face a correction this week,” he continued.

The dollar index fell 0.12% to 99.832 after declining to 99.574 on Friday, its lowest level since April 2022.

The euro climbed 0.14 percent on the day, reaching $1.1242 after reaching $1.12445, its highest level since February 2022.

Despite a modest rebound in the second quarter, the German Bundesbank reported on Monday that the largest economy in the euro zone could contract by more than the 0.3% predicted just a few weeks ago.

Industry-heavy In the wake of the pandemic, Germany is bearing the brunt of a decline in global demand for products, which is the result of higher borrowing costs dampening investment and people spending more on leisure, travel, and other services.

The International Monetary Fund (IMF) reported on Monday that the energy price shock and tightening financial conditions may cause Germany’s economic output to contract marginally this year.

In addition, the European Central Bank is predicted to raise interest rates by 25 basis points the following week.

The dollar fell 0.07% against the Japanese yen to 138.65, after falling to a 17-month low of 137.245 on Friday.

After reaching $1.31440 on Thursday, the highest level since April 2022, the British pound fell 0.06% to $1.3082 on Friday.

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Bid prices for currencies at 3:00 p.m. (1900 GMT)

RIC Last U.S. Close Percentage Change YTD Percentage Low Bid High Bid

Previous Variation Session

Dollar index 99.8320 99.9600 -0.12% -3.535% +100.1800 +99.7510

Euro/Dollar $1.1242 $1.1227 +0.14% +4.92% +$1.1249 +$1.1205

Dollar/Yen 138.6500 138.7500 -0.07% +5.75% +139.4000 +137.9900

Euro/Yen 155.87 155.83 +0.03% +11.10% +156.3400 +155.1100

Dollar/Swiss 0.8599 0.8621 -0.25% -7.00% +0.8630 +0.8580

Sterling/Dollar $1.3082 $1.3090 -0.06% +8.17% +$1.3109 +$1.3051

Dollar/Canadian 1.3183 1.3217 -0.25% -2.69% +1.3232 +1.3163

Aussie/Dollar $0.6823 $0.6839 -0.22% +0.10% +$0.6845 +$0.6788

Euro/Swiss 0.9666 0.9678 -0.12% -2.31% +0.9683 +0.9644

Euro/Sterling 0.8592 0.8574 +0.21% -2.85% +0.8598 +0.8572

NZ $0.6335 $0.6369 -0.53% -0.23% +$0.6368 +$0.6309

Dollar/Dollar

Dollar/Norway 10.0250 10.0570 -0.33% +2.14% +10.0890 +10.0000

Euro/Norway 11.2710 11.2754 -0.04% +7.41% +11.3165 +11.2354

Dollar/Sweden 10.2326 10.2300 -0.03% -1.68% +10.2875 +10.1756

Euro/Sweden 11.4950 11.4983 -0.03% +3.10% +11.5385 +11.4412