The US Dollar Continues to Fall from Its High

On Tuesday, the dollar fell again; risk-sensitive currencies such as the British pound rose and the Australian dollar recovered from an overnight drop.

After falling nearly 5% in January, global equities began in February slightly firmer, and currency markets also reversed. After reaching a 19-month high last week, the US dollar index fell on Monday and was down 0.3 percent on the day at 96.395 on Tuesday. The dollar also lost ground against the Japanese yen, with the pair trading at 114.990.

Currencies

The Australian dollar fell sharply overnight after the Reserve Bank of Australia (RBA) resisted expectations for near-term rate hikes until inflation rose above 2%. However, due to the “risk-on” mood in markets, the Australian dollar quickly recovered and was up 0.3 percent on the day at $0.70895 in early European trading. The British pound was up 0.2 percent at $1.34765. Prime Minister Boris Johnson faced renewed calls to resign after a report into lockdown gatherings at his offices and residence discovered severe leadership failures.

The euro was up 0.2 percent on the day, trading at $1.2585.

This year, investors expect rate hikes despite the European Central Bank’s ultra-easy monetary policy. According to data released on Monday, consumer prices in Germany rose 5.1 percent year on year in January, compared to 5.7 percent in December. If tomorrow’s eurozone inflation data also surprise the upside, the market may bet on a more hawkish ECB. As a result, EUR may find additional support in the run-up to the meeting on Thursday.

Japan’s manufacturing output increased at its fastest rate in nearly eight years. The Russian rouble has recovered to its highest level against the US dollar since January 24. It hit a 15-month low last week, dragged down by tensions between Russia and the West over Ukraine.

Bitcoin was up 0.2 percent to around $38,576, still well below the all-time high of $69,000 set in November. According to India’s finance minister, the central bank will launch a digital currency using blockchain technology in the coming fiscal year.