Forex trends Tuesday: US dollar slumps as Powell comments dampen rate hike view

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

The U.S. dollar retreated Monday, with currencies across much of Asia stronger against the greenback, as U.S. Federal Reserve chief Jerome Powell’s comments last week spurred expectations rates wouldn’t rise as fast as previously signaled.

Powell said on Friday that the central bank would be patient as it evaluated potential risks of an economic slowdown, a message that drove Wall Street optimism and pushed stock indexes higher as it appeared to signal the central bank would tighten policy more slowly than previously expected.

Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, said in a note on Monday, U.S. time, “What is good for stocks may not be good for the U.S. dollar because a slower tightening cycle reduces the attractiveness of the greenback.”

Higher interest rates in the U.S. make the dollar more attractive for investors, compared with lower interest rates available for other currencies.

Currencies

The U.S. dollar index dropped to 95.66 by 7:05 A.M. SGT from as high as 96.04 in Monday’s session and as high as 96.61 on Friday, according to ICE futures data.

The 10-year U.S. Treasury note yield was at 2.697 percent at 8:22 A.M. SGT, rising from levels as low as 2.633 percent in Monday’s session, according to Tullett Prebon data.

The euro/dollar was at 1.1482 at 8:26 A.M. SGT after trading in a 1.1393 to 1.1483 range on Monday, according to DZHI data.

The British pound/dollar was at 1.2785 at 8:26 A.M. SGT after trading in a 1.2711 to 1.2789 range on Monday, according to DZHI data.

The dollar/yen was at 108.71 at 8:27 A.M. SGT after trading in a 107.99 to 108.782 range on Monday, according to DZHI data. That was off the low of 104.707 touched last week, but still well down from December’s high of 113.708, the data show.

The dollar/yuan ended Monday at 6.8500 after trading in a 6.8430 to 6.8691 range during the session, according to DZHI data.

The dollar/Singapore dollar was at 1.3556 at 8:27 A.M. SGT after trading in a 1.3550 to 1.3601 range on Monday, according to DZHI data.

The dollar/Malaysian ringgit was at 4.1090 at 8:25 A.M. SGT after trading in a 4.1050 to 4.1350 range on Monday, according to DZHI data.

The dollar/Indonesian rupiah ended Monday at 14,085 after trading in a 13,990 to 14,345 range during the session, according to DZHI data.

This article was originally published on Tuesday, 8 January 2019 at 8:43 A.M. SGT; it has since been edited. 

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