The Mighty Dollar Declined Against European and Asian Currencies
London: 24 January 2024 (TraderMade): The US dollar experienced a decline on Wednesday as Asian and European currencies, including the Yen, Euro, Sterling, and Yuan, made gains.
The Mighty Dollar Dips: Key Takeaways
- Yen soars! Japanese currency jumps 0.99% on bets for policy shift & Ueda's comments.
- Euro joins the rally: Gains 0.56% as Eurozone PMI indicates easing downturn.
- Sterling shines too: Up 0.57% - fueled by strong PMI and lower BoE rate cut expectations.
- Chinese Yuan strengthens: 0.21% gain on stimulus news and Euro correlation.
- Dollar in retreat: Down 0.69% vs. Yen and 0.35% overall amid shifting expectations for central bank decisions.
Dollar Declines
The dollar was down 0.69% against the Japanese Yen, which surged amid expectations of Japan's potential departure from its ultra-easy monetary policy. Japanese bond yields reached six-week highs, and positive comments from Bank of Japan chief Kazuo Ueda contributed to the belief that the country might exit its loose monetary stance in April.
The Euro also rallied, rising 0.36% to $1.0893, supported by the easing downturn in the Eurozone economy, as indicated by purchasing managers' index (PMI) surveys.
The dollar index was down 0.35% at 103.14, reversing the previous two days' increase and remaining up around 1.8% for the year due to stronger-than-expected data and adjusted expectations for rapid Fed cuts.
Crucial Driving Forces
China's announcement of a reduction in cash reserves for banks in early February aimed at stimulating lending and the economy further boosted the Euro, given its strong correlation with the Chinese market. The onshore yuan strengthened, reaching an almost two-week high of 7.155 against the dollar.
Sterling climbed as well, driven by a robust PMI reading that led traders to scale back expectations for Bank of England rate cuts, a trend initiated by a stronger-than-expected inflation reading earlier in the month. Sterling was 0.39% higher at $1.2735, and the Euro slipped against the pound.
Data Release On Radar
In the broader currency market, little significant change occurred over the last week, with the dollar index almost unchanged. Investors awaited upcoming events, including the European Central Bank's interest rate decision and potential signals about Eurozone borrowing costs.
The Federal Reserve and the Bank of England were also scheduled for rate decisions in the coming week. Additionally, US PMIs and a Canadian interest rate decision were awaited. Despite a slight drop in US bond yields, European stocks and US futures rose, buoyed by positive sentiment following China's stimulus announcement.
