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Forex News: Dollar Firmed Up Last Week Amidst Hawkish Fed

Dollar Firmed Up Last Week Amidst Hawkish Fed Minutes

05/28/2024 - 09:40:00 (RTTNews)

(RTTNews) - The uncertain monetary policy outlook triggered by the mixed comments in the FOMC Minutes helped the U.S. dollar remain firm during the week spanning May 20 to 24. During the week, the U.S. dollar gained against the euro, the Australian dollar and the Japanese yen but weakened against the British pound. The 6-currency Dollar Index also increased during the past week.

The U.S. dollar's strength against a basket of six currencies comprising the euro, the British pound, the Japanese yen, the Canadian dollar, the Swedish kroner and the Swiss franc, as measured by the Dollar Index recorded an uptick of 0.27 percent during the week ended May 24. The DXY closed at 104.72 on May 24, rising from 104.44 a week earlier.

The Fed Minutes released on Wednesday contained concerns about whether the monetary policy was sufficiently restrictive and whether further tightening was warranted. Though FOMC participants assessed that monetary policy was well-positioned, comments by Fed officials during the week added to concerns about Fed keeping interest rates at the current high level for some more time. Amidst the anxiety, the index oscillated between the low of 104.39 recorded on Monday and the high of 105.12 touched on Friday.

The euro slipped 0.23 percent against the U.S. dollar during the week ended May 24 amidst dovish comments from ECB officials. From the level of 1.0870 on May 17, the EUR/USD pair dropped to 1.0845 on May 24. The pair which had touched a weekly high of 1.0885 on Monday recorded the weekly low of 1.0805 on Friday.

The greenback however retreated against the sterling during the week ended May 24. The GBP/USD pair added 0.32 percent, rising to 1.2740 from 1.2699 a week earlier amidst a lesser-than-expected decline in inflation. Headline inflation in April declined to 2.3 percent from 3.2 percent in March whereas markets had expected it to fall to 2.1 percent. The weekly trading range was between the high of 1.2763 recorded on Wednesday and the low of 1.2678 on Friday.

The Australian dollar slipped close to a percent against the U.S. dollar in the last week despite minutes of the Reserve Bank of Australia revealing it deliberated on increasing interest rates. The AUD/USD pair which was at 0.6692 on May 17, plunged to 0.6627 on May 24, implying weekly losses of 0.97 percent. The pair which had touched a weekly high of 0.6711 on Monday recorded the weekly low of 0.6591 on Friday.

The U.S. dollar gained 0.86 percent against the Japanese yen during the week ended May 24, lifting the USD/JPY pair to 156.99, from 155.65 a week earlier. A more-than-expected decline in consumer price inflation triggered concerns about the headroom available to the Bank of Japan to raise interest rates. Amidst the concerns, the USD/JPY pair traded between the low of 155.49 recorded on Monday and the high of 157.20 recorded on Thursday.

Major economic data releases over the ensuing week are bound to sway the currency market sentiment. On the horizon are consumer confidence readings from Japan and Germany, inflation updates from Australia, Germany, France and Euro Area, PMI updates from China as well as GDP readings from U.S. and Canada. Nevertheless, the market spotlight would be on PCE-based inflation readings due from the U.S. on Friday.

Amidst the anticipation, the DXY has declined to 104.39. The EUR/USD pair has increased to 1.0879 whereas the GBP/USD pair has firmed up to 1.2798. The AUD/USD pair has increased to 0.6677. Meanwhile, the yen has gained, dragging the USD/JPY pair to 156.62.

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