The dollar remained uncertain on Tuesday as investors maintained their stance on the anticipated timing of Federal Reserve monetary policy adjustments for the year ahead.
In contrast, cryptocurrencies experienced a surge, led by a notable rise in ether, propelled by heightened risk appetite and growing expectations of the U.S. Securities and Exchange Commission (SEC) approving spot ether exchange-traded funds (ETFs).
The euro saw a marginal increase of 0.06% to $1.0860.
Investor attention is focused on Thursday’s release of data from the European Central Bank’s negotiated wage tracker and euro zone Purchasing Managers’ Index (PMI), seeking further insights into the monetary trajectory in the euro area.
With limited impactful U.S. economic data scheduled this week, investors are turning their focus to a series of speeches from Federal Reserve officials.
Despite a recent easing in consumer price pressures in April, several officials reiterated caution regarding policy adjustments, prompting money markets to price in 42 basis points (bps) of Fed rate cuts in 2024. This implies the expectation of one 25 bps reduction and a 68% probability of a second move by December.
Atlanta Fed President Raphael Bostic’s remarks, suggesting a potentially higher steady rate for the Fed’s benchmark rate, were noted by some analysts as supportive for the dollar.
Themistoklis Fiotakis, head of forex strategy at Barclays, remarked that in the absence of compelling evidence for a sudden U.S. slowdown or a global growth resurgence, a more extensive adjustment in long positioning is needed before the dollar sees a significant rebound.
The dollar dipped by 0.08% against a basket of currencies, settling at 104.52.
Attention now turns to the Personal Consumption Expenditures (PCE) price index report, scheduled for release on May 31, which serves as the Fed’s preferred gauge of inflation.
In the cryptocurrency sphere, ether surged 4.5% to $3,663.40, buoyed by optimism surrounding ETF approval prospects. Bitcoin also climbed above the $70,000 mark, trading 2% higher at $71,128.
Meanwhile, against the yen, the dollar declined by 0.13% to 156.41, hovering close to its lowest level in over 30 years. Japanese authorities’ potential intervention tempered further depreciation of the yen, although the yen’s attractiveness as a funding currency persisted due to significant interest rate differentials between the U.S. and Japan.
Ulrich Leuchtmann, head of forex and commodity research at Commerzbank, highlighted concerns regarding the refinancing of Japan’s substantial government debt, emphasizing the importance of the Bank of Japan’s role.
The New Zealand dollar and the Australian dollar saw slight declines, with the Kiwi falling by 0.02% to $0.6103 and the Aussie slipping by 0.03% to $0.6656. Minutes from the Reserve Bank of Australia’s May meeting indicated a decision to maintain interest rates steady, with potential hikes contingent on inflation forecasts.
