November 26, 2021

Why is the USD depreciating?

 The movement of the US dollar was slightly shaky in the European trading session, showing the king of the currency retreating from the highest peak reached previously.

Even so, the greenback dollar is still trading strong at a more than a year high against its main competitor at 96.66.

Earlier, investors were shown with a report of the minutes of the FOMC meeting saying that the Federal Reserve (Fed) is ready to accelerate the reduction of bond purchases and raise interest rates before inflation rises higher.

This is also supported by the positive outlook, San Francisco Fed President Mary Daly who says she sees one or two interest rate hikes next year.

The US dollar should have strengthened following this hawkish outlook, but the opposite reaction was displayed which may be due to profit -taking activity by investors over the weekend after pushing the currency higher.

Risk -sensitive currencies, the Aussie dollar and kiwi continued to trade lower, coupled with renewed pressure from U.S. -China relations after the Biden administration blacklisted 12 more firms from the mainland.

While the euro got some support from the depreciation of the US dollar, but the currency remained at its lowest level since July 2020 as it was affected by the dovish stance of the European Central Bank (ECB).

The pound is getting closer to its latest low this year, trading around 1.33300 against the greenback dollar.