Traders Have a Negative Long-Term Outlook for the Dollar
On Wednesday, the dollar dropped to a three-year low against the British pound on NSE. The greenback decreased against commodity currencies.
Investors raised bets that a global economic recovery would support riskier assets.
On Tuesday, Jerome Powell, the US Federal Reserve Chairman, stated that interest rates would remain low. Powell said the central bank would keep buying bonds to support the US economy. Many traders believe it is a long-term negative factor for the dollar. There is growing skepticism about the rapid pace of global stock gains.
Also, more money is flowing toward commodity-backed currencies that could benefit from a pick-up in global trade. They are quickly recovering from the coronavirus pandemic, and it is weighing on the dollar.
Junichi Ishikawa, a foreign exchange strategist at IG Securities, stated that economic recovery positively affects commodities prices. Successively, it boosts the currencies of the commodities exporters. Risk appetite has increased, and it’s a significant disadvantage for the dollar, the strategist said.
Analysts say that the dollar looks less attractive for economies with limited disruptions by the coronavirus outbreak. Their central bankers now face questions of when to begin tightening policies.
The pound sterling has good prospects for the future
The economic outlook has brightened for the Sterling. The British pound increased to $1.4170, its highest level since April 2018. Investors anticipate Britain’s rapid coronavirus vaccination program and its plans to loosen lockdown restrictions on economic activity to impact the economy positively.
The New Zealand dollar dropped shortly but stabilized soon. The currency edged up to $0.7367, close to a three-year high.
The central bank of the country expressed some caution about the economic outlook. In fact, it stated inflation and employment would remain below their targets in the medium term. It may have disappointed some traders who expected central bankers to acknowledge a recent economic data improvement.
However, the NZ central bank managed monetary policy to maintain price stability.
Moreover, the Australian dollar jumped to a three-year high of $0.7945, benefitting from rising metal and energy prices.
The dollar traded at $1.2158 against the euro.
The benchmark managed to increase to 105.40 Japanese yen.
It hit an almost three-month high against the Swiss franc. However, the overall sentiment on the dollar was still negative.
The DXY against a basket of six major currencies slipped to 90.025.
In the crypto market, Bitcoin stopped its drop and stabilized at $49,052. Some analysts still claim that the recent surge in this digital asset was excessive.
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