Forex trends Tuesday: Dollar declines despite expectations Fed will hike rates

U.S. one-dollar currency notes; taken September 2018.U.S. one dollar bills.

The U.S. dollar lost ground on Monday despite expectations for a Federal Reserve rate hike this week.

“Investors are selling dollars ahead of what is widely expected to be the fourth rate hike this year. Contrary to popular belief, interest rate hikes are not always good for a currency,” Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, said in a note on Monday U.S. time.

She noted the market has already priced in a 25 basis point rate hike from the Federal Reserve this week, but that Fed fund futures were only pricing in one increase next year.

“Most investors expect the central bank to be less hawkish so if the Fed makes it clear that further rate hikes are needed and there’s still scope for three rounds of tightening, the dollar will soar regardless of [Fed chief Jerome] Powell’s concerns about the economy,” she said.

Currencies

The U.S. dollar index was at 97.13 at 7:04 A.M. SGT, after touching levels as low as 97.06 on Monday, off levels as high as 97.68 on Friday, according to ICE futures data.

The U.S. 10-year Treasury note yield was at 2.855 percent at 8:37 A.M. SGT after dipping as low as 2.848 percent on Monday from as high as 2.896 percent earlier in the session, according to Tullett Prebon data.

The euro/dollar was at 1.1344 at 8:39 A.M. SGT after trading in a 1.1297 to 1.1358 range on Monday, according to DZHI data.

The British pound/dollar was at 1.2610 at 8:39 A.M. SGT after trading in a 1.2572 to 1.2647 range on Monday, according to DZHI data.

The dollar/yen was at 112.691 at 8:40 A.M. SGT after trading in a 112.65 to 113.521 range on Monday, according to DZHI data.

The dollar/yuan ended Monday at 6.8961 after trading in a 6.8916 to 6.9076 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3725 at 8:40 A.M. SGT after trading in a 1.370 to 1.3773 range on Monday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1770 at 8:30 A.M. SGT after trading in a 4.1715 to 4.1880 range on Monday, according to DZHI data.

The dollar/Indonesian ringgit ended Monday at 14,570 after trading in a 14,533 to 14,625 range during the session, according to DZHI data.

 

Get the Shenton Wire morning briefing in your inbox