US Markets

FOREX-Euro climbs as ECB eyes rate hikes, dollar slides

Credit: REUTERS/Thomas White

The dollar index fell on Monday while the euro rallied after the European Central Bank indicated a move from negative interest rates, and riskier currencies gained ground along with equities.

By Sinéad Carew

NEW YORK, May 23 (Reuters) - The dollar index fell on Monday while the euro rallied after the European Central Bank indicated a move from negative interest rates, and riskier currencies gained ground along with equities.

ECB President Christine Lagarde said in a blog post that the bank was likely to lift the euro area deposit rate out of negative territory by the end of September and could raise it further if it saw inflation stabilising at 2%.

After declining last week, U.S. equities followed European stocks higher on Monday. .N

The euro's rally came as the dollar fell broadly, with a selloff that began accelerating last week. FRX

Investors had more appetite for riskier assets on Monday as they reacted to Lagarde's comments and easing worries that a European recession was imminent while the U.S. outlook looked less inspiring, according to Erik Nelson, macro strategist at Wells Fargo, New York.

"We're seeing more optimism around global growth - European growth, Chinese growth, UK growth, and a little bit less optimism about U.S. growth. So the growth divergence theme is really a big thing and moving out of favor for the dollar," he said.

The euro was the big gainer, last up 0.92% at $1.0666 EUR=EBS, having risen as much as 3.3% from its multi-year intraday low of $1.0349 on May 13.

The U.S. dollar index =USD, up about 16% to a two-decade high to 105.01 over the 12 months to the middle of May, was last down 0.73% on Monday at 102.19.

Last week speculators' net long positioning on the U.S. dollar slipped, after hitting their highest level since late November in the previous week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The U.S. dollar has soared this year but with expectations for repeated Federal Reserve interest rate hikes priced in, Wells Fargo's Nelson said it may trade sideways for some time.

"The Fed will have a hard time becoming incrementally more hawkish," he said.

The Australian dollar, which initially showed a muted reaction to the victory for the centre-left Labor Party in national elections at the weekend, was up 0.89% at $0.7113 AUD=D3.

CHINA BOOST

Meanwhile the Swiss franc was gaining against the dollar after Swiss National Bank governing board member Andrea Maechler said in an interview published on Monday that the bank will tighten monetary policy if inflation in Switzerland remains persistently high. The dollar was last down 0.96% against the Swiss franc after hitting its lowest level since late April.

Sentiment around China also helped riskier currencies. Shanghai is edging out of lockdown, and an unexpectedly big rate cut in China last week reassured investors. Also China will broaden its tax credit rebates, postpone social security payments and loan repayments, roll out new investment projects and take other steps to support the economy, state television quoted the Cabinet as saying on Monday.

The yuan had its best week since late 2020 last week and in offshore markets on Monday firmed to 6.6542 per dollar CNH=EBS, its strongest since early May. CNY/

Geopolitics are also in focus in Asia this week as U.S. President Joe Biden tours the region.

========================================================

Currency bid prices at 10:33AM (1433 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Dollar index

=USD

102.1900

102.9500

-0.73%

6.823%

+102.9500

+102.0700

Euro/Dollar

EUR=EBS

$1.0666

$1.0569

+0.92%

-6.18%

+$1.0687

+$1.0559

Dollar/Yen

JPY=EBS

127.5950

127.9200

-0.25%

+10.84%

+128.0550

+127.1600

Euro/Yen

EURJPY=

136.08

135.03

+0.78%

+4.42%

+136.3000

+134.6700

Dollar/Swiss

CHF=EBS

0.9650

0.9743

-0.96%

+5.78%

+0.9751

+0.9629

Sterling/Dollar

GBP=D3

$1.2569

$1.2496

+0.62%

-7.04%

+$1.2601

+$1.2482

Dollar/Canadian

CAD=D3

1.2775

1.2846

-0.55%

+1.04%

+1.2842

+1.2772

Aussie/Dollar

AUD=D3

$0.7113

$0.7052

+0.89%

-2.12%

+$0.7127

+$0.7046

Euro/Swiss

EURCHF=

1.0291

1.0289

+0.02%

-0.75%

+1.0335

+1.0266

Euro/Sterling

EURGBP=

0.8484

0.8457

+0.32%

+1.00%

+0.8495

+0.8434

NZ Dollar/Dollar

NZD=D3

$0.6468

$0.6410

+1.01%

-5.41%

+$0.6491

+$0.6400

Dollar/Norway

NOK=D3

9.6100

9.7400

-1.31%

+9.11%

+9.7330

+9.5965

Euro/Norway

EURNOK=

10.2550

10.2923

-0.36%

+2.42%

+10.3123

+10.2207

Dollar/Sweden

SEK=

9.8284

9.9285

-0.14%

+8.99%

+9.9711

+9.8115

Euro/Sweden

EURSEK=

10.4840

10.4983

-0.14%

+2.44%

+10.5190

+10.4595

World FX rateshttps://tmsnrt.rs/2RBWI5E

FX market positionshttps://tmsnrt.rs/3wL8Yqa

(Reporting by Sinéad Carew in New York and Tommy Wilkes in London Additional reporting by Tom Westbrook in Singapore Editing by Jan Harvey and Matthew Lewis)

((saikat.chatterjee@thomsonreuters.com; +44-20-7542-1713; Reuters Messaging: saikat.chatterjee.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More