Dollar is licking its wound as the policy peak looms

After suffering its worst weekly slump of the year, the dollar found solace today as traders anticipated on economic data and policy decisions before dumping it further. Euro was trading at below the peak after gaining 2.4% last week to a 16-month high. Yen, which also gained 2.4% last week, remained stable at 138.56 per dollar. 

Earlier today, Chinese growth figures came in slightly higher than expected, but there was minimal currency market reaction as traders had already priced in a weak quarter. Traders are also waiting to see if the government were to increases stimulus to encourage expenditure. 

The Australian and New Zealand currencies both fell slightly, with the Aussie closing at $0.6821, down from last week’s top of $0.6895. The Kiwi went down 0.2% to $0.6355, after touching a five-month high of $0.6412 on Friday. A strategist at Commonwealth bank of Australia mentioned that the data released earlier today suggests that China’s post-covid block is over. However, markets already had low expectations and the reaction is fairly limited, added on by the strategist. 

The decline of dollar began with yen buying last week as investors unwinded yen-funded positions in emerging markets. However, it accelerated as weaker than expected U.S. inflation data bolstered bets that the U.S. interest rates will soon peak. Hikes are predicted for the Fed and the European Central Bank next week, but market pricing shows that the Fed will likely halt before cutting rates next year, while another boost is likely to be in Europe. 

Risk Disclaimer:

Please note that this article does not offer any instructions or suggestions regarding investment decisions. Therefore, it is essential that you carefully evaluate your financial situation and conduct thorough analysis, or seek advice from a qualified professional, before making any investment decisions.