The U.S. dollar traded close to a three-month high; why?
The U.S. dollar traded close to its lowest level in three months against a resurgent euro, struggling for traction. Notably, investors pared earlier bets the U.S. Federal Reserve may soon be ready to narrow its stimulus.
The U.S. dollar index, which tracks the dollar against a basket of six currencies, was traded at 90.027. It was above a three-month low of 89.646, reached on Friday.
Additionally, minutes from the Federal Reserve’s April policy meeting released last week revealed a sizable minority of policymakers wanted to discuss tapering bond purchase.
Fed Chairman Jerome Powell’s reiterated warnings that it is not time to consider reducing quantitative monetary easing. Remarkably, it has led many investors to believe it will be months before the central bank change policy.
According to data from U.S. Commodity Futures Trading Commission, speculators slightly raised their net short dollar positions in the latest week while increasing long positions on the euro for four weeks in a row.
The euro traded at $1.2179, off a three-month high of $1.2245 hit on Wednesday.
Some analysts say that the currency was capped by comments from ECB President Christine Lagarde on Friday. Lagarde announced that it too early for the bank to discuss narrowing its 1.85 trillion euro emergency bond purchase scheme.
Economic reopenings supported the euro and other European currencies
However, the euro and other European currencies have been supported by soaring optimism about economic reopenings in the region from COVID-19 lockdowns.
The British pound traded at $1.4144, off Friday’s three-month high of $1.4233.
In the volatile cryptocurrency market, bitcoin dropped over 7% during the weekend to last trade at $34,157, falling to $31,107 at one point on Sunday.
The second-largest cryptocurrency, Ethereum, dropped to a two-month low of $1,730 on Sunday, down 60% from a record high reached 12 days ago and last traded at $2,052.
Cryptocurrencies have fallen after Elon Musk’s Tesla announced it will stop accepting bitcoin and after China tightened clampdown on them.
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