The US dollar edges lower

US dollar dips as inflation concerns ease

The easing of inflation fears on Wall Street overnight saw the US dollar continue to give up some of its recent gains, the dollar index falling by just 0.15% to 91.95. The primary winner overnight was the euro, with EUR/USD climbing out of its danger zone, rising 0.25% to 1.1925. USD/JPY continued to consolidate gains, ranging each side of 108.50.

The commodity currencies all recorded modest gains overnight, but the Australian and New Zealand dollars remain in corrective territory and vulnerable to US inflation developments. The Canadian dollar climbed after the Bank of Canada held steady overnight, but USD/CAD still remains within shouting distance of long-term resistance.

In Asia today, the US dollar has weakened slightly after the US-China announcement. However, activity amongst the major and Asian regional currencies is muted, with trading ranges remaining tight. That suggests that forex markets are refusing to buy into headline hype for now and are more tightly focused on tonight’s US Jobless Claims data and the US 30-year bond auction.

Over the past two sessions, the US dollar’s gentle retreat has looked corrective and directly correlated to the slight fall in US yields. In the bigger picture, the US dollar short-squeeze still looks like it has plenty to go. The Biden stimulus plan will impact US data almost immediately, raising the inflation spectre again. The US dollar will continue to remain a buy on dips over the next few weeks.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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