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The dollar declined U.S. data disappoints

The U.S. dollar declined versus a basket of currencies on Monday, ceding some of the ground gained in the previous session. Meanwhile, U.S. Treasury yields retreated, and lackluster data weighed on the greenback.

U.S. manufacturing activity grew slower in April, likely constrained by shortages of inputs amid pent-up demand unleashed by increasing vaccinations and massive fiscal stimulus. The data sent U.S. Treasury yields lower.

The U.S. dollar index, which gauges the dollar versus a basket of six currencies, declined by 0.3% and traded at 90.969.

According to Shaun Osborne, chief currency strategist at Scotiabank, the U.S. dollar’s sharp rally on Friday may not be the start of a broader recovery.

Bearish sentiment toward the greenback is on the rise after a brief pullback. Furthermore, U.S. dollar net short positioning increased this week to the highest level since late March.

The greenback dropped against the euro on Monday after a survey showed euro zone factory activity growth rose to a record high in April, increased by burgeoning demand and driving a surge in hiring. However, supply constraints led to an unprecedented increase in unfulfilled orders.

Comments by Luis de Guindos, the ECB’s vice president, also helped the euro. According to him, the European Central Bank can start to phase out emergency stimulus measures when the pace of COVID-19 vaccinations reaches a critical level and the economy picks up speed.

Trading in foreign exchange markets was reduced by holidays in Japan, China, and Britain, which kept a lid on volatility.

The risk-sensitive currencies, Australian and New Zealand dollars, were firmer on Monday, though not enough to recoup Friday’s losses.

the U.S. economy has a long way to go

In cryptocurrency markets, the world’s second-largest cryptocurrency, ethereum, broke past $3,000 to post a new record high of $3,203.18. Bitcoin is trading about $56,000 after dropping to lower levels while XRP dropped below $1.48.

Furthermore, the precious metal is also trading below $1,790 after increasing toward $1,800 on April 3. Meanwhile, WTI Crude oil is trading about $64, below the highs.

The greenback is gaining ground across the board, despite a slide in Treasury yields. Returns on 10-year bonds are about 1.61%. Jerome Powell, Chair of the Federal Reserve, stressed that low-income people are still struggling to return to work. His colleague John Williams also announced that the U.S. economy has a long way to go.

 

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