Yellen sends the dollar lower

Yellen’s stimulus testimony weighs on dollar

Janet Yellen testified on Tuesday at her confirmation hearing for US Treasury Secretary. Yellen’s remarks on additional US stimulus, to the tune of USD1.9 trillion, triggered gains for equities but losses for the US dollar.

The US dollar edged lower as Ms Yellen’s “go big or go home” testimony on fiscal stimulus increased risk appetite generally. That fed through to a slightly weaker US dollar, with the dollar index falling 0.29% to 90.50. The index has eased again this morning with regional Asian currencies outperforming, falling another 0.15% to 90.36. The dollar index has been content to range between 90.00 and 91.00 over the past week. A daily close above or below those points will set the next direction for the US dollar.

The major currencies all rallied overnight, notably the euro and the Australian and New Zealand dollars, which continue higher this morning, along with sterling. However, all still remain firmly in downside breakout patterns, suggesting that the US dollar short squeeze is not done with markets just yet. EUR/USD needs to reclaim 1.2300, AUD/USD 0.7700, NZD/USD 0.7300 and GBP/USD 1.3700 to change that technical outlook.

The European Central Bank and the Bank of Canada also announce rate decisions over the next 24 hours. I expect no change from either, but the ECB may note the increasing risks to the European recovery due to the sweeping national lockdowns across the bloc. Neither decision should have much impact on the markets.

US stimulus talk and a new US president have been more keenly felt in Asia, with regional currencies rallying strongly today. That suggests that much of the new-found positive sentiment is flowing to Asian, not to major currencies. USD/CNY is 0.15% lower at 6.4700 with the yuan’s range trading set to continue. The Singapore dollar and Indonesian rupiah are 0.20 higher today, with the Malaysian ringgit unchanged ahead of the Bank Negara decision.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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