The Dollar Falls from Two-Month High as Risk Sentiment Improves
The dollar index dropped 0.2% to 103.18 after five consecutive weeks of gains, but remains close to its recent high of 103.68. This decline is attributed to improved risk sentiment in Europe and positive market indicators. European shares are higher, and Wall Street futures suggest a positive open. However, the market remains cautious as attention turns to the upcoming Federal Reserve’s Jackson Hole symposium, where Fed Chair Jerome Powell is expected to speak on Friday. Powell’s comments will likely influence US Treasury yields, which have been driving the dollar’s recent rise.
Key Points:
- Improved risk sentiment in Europe weighs on the dollar
- Attention shifts to the Federal Reserve’s Jackson Hole symposium
- Jerome Powell’s speech may impact US Treasury yields and the dollar
- Australian and New Zealand dollars near nine-month lows after China’s rate cut
- Antipodean currencies vulnerable to rate outlook and US dollar strength
The Australian and New Zealand dollars are pinned close to nine-month lows following China’s rate cut, which disappointed markets concerned about a stalling economy. Market experts believe that Chinese authorities are cautious about reigniting the property market boom and are easing policy to avoid such risks. This easing policy has led to a lower currency exchange rate, particularly for the Australian dollar. The offshore yuan initially fell but later rebounded after Chinese state-owned banks were seen actively managing offshore yuan liquidity, making it costlier to short the currency. The yen is also being watched for potential intervention, as it has fallen to levels where authorities stepped in last year. Bitcoin, which experienced a significant drop last week, is currently at $25,997.
Hot Take:
The dollar’s decline from its recent high reflects improved risk sentiment in Europe and positive market indicators. However, cautiousness remains as market participants await Fed Chair Jerome Powell’s speech at the Jackson Hole symposium. The Australian and New Zealand dollars have been affected by China’s rate cut, and the Antipodean currencies are vulnerable to the rate outlook and the strength of the US dollar. Market experts believe that Chinese authorities are focused on avoiding risks associated with the property market boom, leading to a lower exchange rate for the Australian dollar. The offshore yuan initially fell but rebounded, while the yen is being closely monitored for potential intervention. Bitcoin is currently recovering from its recent drop.
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