US dollar declining from almost three-month top, putting it on the defensive
Following a two-day surge of 1.4% versus the euro on the back of surprisingly positive US employment statistics and further dovish remarks from Federal Reserve Chairman Jerome Powell, which prompted an initial interest rate decrease, analysts attributed the dollar's slide to technical considerations. Stakes cut too deep.
US bond rates declined on Wednesday, continuing to weigh on the dollar after dropping from over three-month highs against the euro earlier in the day.
Following a two-day surge of 1.4% versus the euro on the back of surprisingly positive US employment statistics and further dovish remarks from Federal Reserve Chairman Jerome Powell, which prompted an initial interest rate decrease, analysts attributed the dollar's slide to technical considerations. Stakes cut too deep.
Due to strong demand for the new three-year notes, US Treasury rates also declined from their overnight highs, which helped to weaken the dollar's position.
In early Asia trade on Wednesday, the dollar was little changed at $1.0755 per euro, after a 0.1% decline on Tuesday when it reached $1.0722, its highest level since November 14.
After falling 0.29% on Tuesday, the US dollar index, which compares the value of the currency to six important rivals, including the euro, was unchanged at 104.14. It had risen to 104.60 on Monday, the highest level since November 14.
According to Matt Simpson, senior markets analyst at City Index, "the US dollar might have been forgiven for being the weakest FX major on Tuesday, since the decline looked like a retracement from its two-day rally between Friday and Monday."is composed."
He said, "But we ought to acknowledge the fact that the U.S. Dollar index preserves a bullish daily structure," adding that a decline below 139.50 would prepare it for the next upward run.
The dollar fell 0.49% overnight but remained stable at 147.905 yen. Treasury yield changes have a significant impact on the currency pair.
The U.S. CPI report on Tuesday has been seen by analysts and traders as a crucial test for rate bets.
With a 68.1% possibility at the beginning of the year, traders are now pricing in a 19.5% chance of a rate decrease in March, according to CME Group's FedWatch tool.
"Financial markets are currently adjusting their anticipations regarding Federal Reserve policy," said James Knievelton, Convera's senior corporate fx dealer.
"If the US continues to release strong economic data, especially regarding inflation, the tide may shift in favor of an earlier rate cut, which could further weaken the US dollar."
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