Dollar holds steady as market prices in ECB rate move

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Investing.com - The dollar traded higher against most major currencies on Monday mainly on safe-haven demand as investors priced in the possibility of a European Central Bank rate cut in June, though escalating Ukraine tensions and demand for the euro among bargain hunters steadied the greenback.

In U.S. trading on Monday, EUR/USD was flat at 1.3758.

Last week, the European Central Bank left interest rates unchanged at 0.25%, though the euro dropped after ECB President Mario Draghi said the bank's governing council would feel comfortable with acting at its next meeting after the bank publishes fresh inflation and growth forecasts.

The euro dropped on Draghi's comments though the currency found support on Monday, posting cautious gains against the dollar earlier.

On Monday, ECB Vice President Vitor Constancio said medium-term inflation outlook will take center stage when monetary authorities consider implementing fresh policy measures.

He said the ECB was considering a wide range of policy options but stopped short of indicating what the bank may decide.

He stressed the ECB won't ignore the euro's strength but added that the exchange rate is not a policy target.

Elsewhere Monday, International Monetary Fund head Christine Lagarde renewed calls for more stimulus from the ECB, warning that persistently low inflation rates posed a serious threat to the European recovery.

Geopolitical concerns capped the greenback's advance due to fears U.S. recovery could hit a pothole if the crisis in Ukraine develops further, as many U.S. businesses are heavily exposed to Europe.

Pro-Russian separatists claimed victory in a weekend referendum on self rule in the eastern Ukrainian city of Donetsk, which stirred concerns that the country is sliding closer to civil war.

The vote has been condemned by Ukraine's government and the West, which has threatened to hit Russia with fresh sanctions.

The dollar was up against the yen, with USD/JPY up 0.30% at 102.16 and up against the Swiss franc, with USD/CHF up 0.19% at 0.8879.

The greenback was down against the pound, with GBP/USD up 0.10% at 1.6866.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.02% at 1.0900, AUD/USD down 0.02% at 0.9362 and NZD/USD up 0.06% at 0.8618.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.05% at 79.96.

On Tuesday, the U.S. is to produce data on retail sales, as well as reports on import prices and business inventories.

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This article appears in: Investing , Forex and Currencies

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