The dollar edged lower against a basket of major currencies on Monday but its moves were largely muted as traders awaited a much-anticipated U.S. Federal Reserve meeting later this week that might signal a change in the outlook for U.S. monetary policy.
Currency settled in tight ranges with implied volatility plumbing to multi-year lows after last week’s strong inflation readings and a dovish European Central Bank meeting failed to dislodge currencies from recent trading levels.
“It’s all about the FOMC this week, and we’ll be watching to see exactly how much taper talk has really been going on and if it has any impact on the medium term outlook,” Brad Bechtel, global head of FX at Jefferies, said in a note.
“My guess is that (Federal Reserve Chair Jerome) Powell deftly kicks the can down the road once again and pushes the time frame for any ‘real’ taper talk to later in the summer,” Bechtel said.
The dollar index, which measures the greenback against a basket of six currencies, was up 0.1% at 90.427. Last week the index rose 0.4%, its largest weekly change in five weeks.
Muted FX moves in recent weeks crushed the Deutsche Bank FX Volatility Index down to 5.6 on Friday, its lowest in nearly 16 months.
“Many currency pairs have been in incredibly tight ranges for weeks, if not months, now and though we can’t see that continuing for too much longer, sadly it’s too hard to call a likely side for now,” said John Marley, CEO of forexxtra, a London-based FX consultancy.
The Fed begins a scheduled two-day policy meeting on Tuesday. Nearly 60% of economists in a Reuters poll said a much-anticipated taper announcement will come in the next quarter, despite a patchy recovery in the job market.
Recent data pointing to a surge in inflation has raised concerns that price pressure following the post-COVID economic reopening could force policymakers into an earlier tapering of currency-depreciating stimulus.
Sterling was largely unmoved by Monday’s news that Britain is set to delay the end of social distancing measures as the government seeks to contain a rapid rise in COVID-19 infections.
In cryptocurrencies, bitcoin traded above $40,000, for the first time in more than two weeks, after getting an almost 10% lift on Sunday, when Tesla Inc CEO Elon Musk tweeted that the electric carmaker will allow bitcoin transactions again when miners who verify transactions use more renewable energy.
(Reporting by Saqib Iqbal Ahmed in New York and Saikat Chatterjee in London; Editing by Catherine Evans and Bernadette Baum)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
First Published: Mon, June 14 2021. 19:47 IST