The U.S. Dollar Declined on Tuesday. What About the Euro?
The U.S. dollar plunged on Tuesday after gaining in the previous session. The currency seems set for a fourth consecutive monthly loss. Investors are waiting for the Federal Reserve’s decision about the interest rates policy. The agency’s meeting is scheduled this week, along with the European central bank and the Bank of England. All three major banks will announce their new tightening plans before Friday. Yesterday, the dollar rallied due to the cautious market mood ahead of these meetings. However, that wasn’t enough to support the greenback today.
In January, the U.S. dollar index plummeted by 1.3%. It exchanged hands at 102.28 today. On the other hand, the Euro surged forward by 1.3% this month. It is currently trading near its nine-month high. The common currency skyrocketed to $1.0913 in the previous session. New data showed that Spanish inflation hit new heights in 2023. That news supported the currency as traders took the report as an indicator that the ECB would deliver a higher rate hike. However, the Euro soon decreased to $1.0845, ending the session lower on Monday. The British Pound also traded in the red. Despite that, the sterling seems set for monthly gains.
Investors are focusing on the Atlantic U.S. employment cost data. The Fed often relies on the labor market to determine its monetary policy. Thus, the market participants will look for hints to ascertain the agency’s possible plans.
Chris Weston, the head of research at broker Pepperstone in Melbourne, stated that if the Federal Reserve hints that it mightn’t move forward with another hike this week, the riskier assets could surge forward. That will also cause the dollar’s sell-off.
The Australian Dollar Declined. What About the New Zealand Dollar?
The Australian and New Zealand dollars tumbled on Tuesday. However, they will likely end this month with gains. The same is true for the Canadian currency. The New Zealand dollar exchanged hands at $0.6474. The Kiwi soared by more than 1.5% for the month.
Overall, the Aussie dollar shaved off 0.7% today. It traded at $0.7036 at last. The currency gained approximately 3.2% for January, though. The Australian government warned about the consumption today. The news reports show that retail sales experienced their biggest decline last month in more than two years. That means the rate hikes are weighing on the economy.
Meantime, the Japanese Yen dropped by 0.4% on Tuesday. Nonetheless, the currency managed to steady later in Asia. It traded at 130.26 at last. The Yen will also end this month with gains.
Moreover, Tony Sycamore, the analyst at brokerage IG Markets in Sydney, noted that the currencies seem to move toward the end of their rally against the greenback. Dollar buying and traders’ cautious moods also weigh on them. According to surveys, investors expect the Fed to announce a 25-basis point (bp) rate increase, along with two more hikes in the coming months.
What About the EM Currencies?
On Tuesday, most emerging Asian currencies and shares traded in the red. Philippine stocks suffered the most. They plunged by 3.3%, experiencing their sharpest drop since December 2022. Indonesia’s rupiah also decreased by 0.1% today. The currency traded near its lowest level since September 2022. However, it soared by almost 4% in January, ending the month with gains. On the other hand, Malaysia’s ringgit tumbled by 0.1%.
The Chinese yuan also fell by 0.1% despite the country’s manufacturing data showing its economy is recovering. According to reports, China’s economic activity rebounded in January. After the government weakened its strict coronavirus rules, the economy steadfastly continues growing.
Moreover, Thailand’s factory output plummeted more than analysts expected last month. It seems a global economic recession weighed on the demand for Thai exports. The latter declined significantly. Consequently, shares in Bangkok shaved off 0.3% today. At the same time, the baht dropped by 0.1%.
On Tuesday, South Korea’s won also fell by as much as 0.3%. Stocks in Seoul ended lower by 1%, as well. In December, the country’s industrial output dropped more sharply than economists forecasted. Furthermore, India’s rupee declined by 0.3%, with stocks tumbling by 0.4%.
Chidu Narayanan, the Asia rates and markets strategist at BNP Paribas, noted that most Asian EM currencies currently seem to be consolidating. They are following substantial gains acquired this month.
