November 9, 2021

US Dollar Back Weak? This Is What Investors Need To Know

 The US dollar depreciated on Monday with a decline below a 15-month high after the market began to appreciate the released data especially employment data. Market players are beginning to re -evaluate rate hike expectations and central bank tolerance for inflation.

Last week, the Fed re -emphasized the view that this high inflation is only temporary. However, the decision taken by the Bank of England (BoE) to maintain interest rates has taken the market by surprise. In addition, the market also took indications through the report of the Reserve Bank of Australia (RBA) also promised to be patient with the policy.

The US dollar index has lost 0.31% at the time of writing against major currencies to a trading level of 94.028. According to market analysts, Neil Jones argues that market players are choosing to reduce US dollar investment because the central bank is unlikely to make a move in the near future.

Jones said that a less rapid rate hike benefits riskier assets like stocks, which correlate against the U.S. dollar.

For now, the Fed and volatile markets are focusing on CPI inflation which will be released on Wednesday.

MUFG economist Lee Hardman thinks a poor labor market will push the Fed to accelerate interest rate hikes.

On the other hand, the AUD showed a 0.1% increase to the trading level of $ 0.7408. The NZD strengthened 0.6% to $ 0.7163, after Prime Minister Jacinda Arden announced that the economic shutdown was likely to be phased out by the end of the month.

Finally, the British pound rose 0.4% to $ 1.3537, recovering from a five -week low hit last week after the Bank of England meeting.

The market is focused on the follow -up measures to be taken by the central bank.