US Markets

FOREX-U.S. dollar on track for second week of gains; Fed meeting in focus

Credit: REUTERS/MOHAMED AZAKIR

The U.S. dollar was on course on Friday for a second week of gains after a turbulent few days when currencies were buffeted by shifting risk appetite, with the market's focus now on next week's Federal Reserve meeting.

By Gertrude Chavez-Dreyfuss and Ritvik Carvalho

NEW YORK/LONDON, July 23 (Reuters) - The U.S. dollar was on course on Friday for a second week of gains after a turbulent few days when currencies were buffeted by shifting risk appetite, with the market's focus now on next week's Federal Reserve meeting.

Some analysts wondered, though, whether the dollar's recent rally may be losing momentum.

The dollar index =USD, which measures the greenback against a basket of six major currencies, was slightly higher on the day at 92.877. For the week, it is up 0.2%, after rising 0.6% previously.

But that was off a 3-1/2-month high of 93.194 hit on Wednesday, after strong Wall Street earnings helped investors regain some confidence amid earlier worries that the Delta coronavirus variant could derail the global recovery.

Risk appetite among investors remained high on Friday, with U.S. stocks rising, U.S. Treasuries selling off, most commodity currencies well-bid on the day, and the greenback off its peaks.

"The dollar looks tired especially after the rally of the last few weeks," said Erik Nelson, macro strategist, at Wells Fargo Securities in New York. "It seems to be running out of steam both from a fundamental and technical perspective."

So far in July, the dollar has gained 0.6%, after rising 2.8% in June.

Wells Fargo's Nelson, however, was not convinced the dollar could hold its gains in the coming weeks given the decline in U.S. Treasury yields.

Since the beginning of July, U.S. benchmark 10-year Treasury yields US10YT=RR have lost 16 basis points, on track for their largest monthly fall since March 2020.

"You had a huge move lower in U.S. rates. I also think the Fed is going to be one of the laggards among central banks normalizing policy," Nelson said.

The market's next major focus is the Fed's two-day policy meeting next week. Since the previous meeting on June 16, when Fed officials dropped a reference to the coronavirus as a weight on the economy, cases have risen.

Many economists, however, still expect the meeting to advance discussions for a tapering of stimulus.

Against the safe-harbour yen JPY=EBS, the dollar rose 0.3% to 110.53 yen.

Meanwhile, the euro EUR=EBS was down 0.1% at $1.1763, showing little reaction to the purchasing manager surveys coming out of France, Germany and the euro zone as a whole.

Euro zone business activity expanded at its fastest monthly pace in over two decades in July as the loosening of more COVID-19 restrictions gave a boost to services, but fears of another wave of infections hit business confidence.

The data came in the wake of the European Central Bank's meeting on Thursday, in which it pledged to keep interest rates at record lows for even longer.

The Australian dollar AUD=D3 - viewed as a proxy for risk appetite - slid 0.1% to US$0.7374, heading for a fourth straight weekly loss.

With half the Australian population under lockdown, economists said the country's central bank could increase stimulus rather than decrease it at its next policy meeting.

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

Currency bid prices at 9:59AM (1359 GMT)

Description

RIC

Last

U.S. Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Dollar index

=USD

92.9370

92.8310

+0.12%

3.285%

+93.0280

+92.7770

Euro/Dollar

EUR=EBS

$1.1765

$1.1771

-0.05%

-3.70%

+$1.1787

+$1.1755

Dollar/Yen

JPY=EBS

110.4150

110.1550

+0.23%

+6.86%

+110.5850

+109.9200

Euro/Yen

EURJPY=

129.90

129.65

+0.19%

+2.35%

+130.1800

+129.6300

Dollar/Swiss

CHF=EBS

0.9206

0.9192

+0.15%

+4.06%

+0.9222

+0.9187

Sterling/Dollar

GBP=D3

$1.3752

$1.3769

-0.13%

+0.66%

+$1.3779

+$1.3720

Dollar/Canadian

CAD=D3

1.2588

1.2555

+0.28%

-1.13%

+1.2593

+1.2552

Aussie/Dollar

AUD=D3

$0.7372

$0.7384

-0.16%

-4.17%

+$0.7400

+$0.7359

Euro/Swiss

EURCHF=

1.0829

1.0819

+0.09%

+0.20%

+1.0841

+1.0817

Euro/Sterling

EURGBP=

0.8555

0.8547

+0.09%

-4.27%

+0.8584

+0.8547

NZ Dollar/Dollar

NZD=D3

$0.6976

$0.6975

+0.02%

-2.85%

+$0.6992

+$0.6961

Dollar/Norway

NOK=D3

8.8730

8.8495

+0.00%

+3.06%

+8.8790

+8.8355

Euro/Norway

EURNOK=

10.4405

10.4076

+0.32%

-0.26%

+10.4498

+10.4065

Dollar/Sweden

SEK=

8.6939

8.6771

+0.11%

+6.07%

+8.6982

+8.6723

Euro/Sweden

EURSEK=

10.2270

10.2160

+0.11%

+1.49%

+10.2325

+10.2068

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

Dollar set for second week of gainshttps://tmsnrt.rs/3BztCLN

(Reporting by Gertrude Chavez-Dreyfuss in New York and Ritvik Carvalho in London Editing by Pravin Char and Mark Potter)

((gertrude.chavez@thomsonreuters.com; 646-301-4124; Reuters Messaging: gertrude.chavez.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