On Tuesday, the U.S. dollar priced higher followed reaching its fresh low since late August against a basket of currencies. The euro dropped 0.45 percent against the U.S. currency, to price at $1.1381. At the meantime, the Japanese yen was off its 17-month peak to price at 108.55, down 0.6 percent. The greenback has weakened by a notable sell-off over the last month, crashing 5 percent due to investors have slashed their expectations for when the Federal Reserve will hike U.S. interest rates again since Chair Janet Yellen brought skepticism over the outlook that there might be two raises in 2016.
Fed funds futures indicate only one quarter point growth for the whole of 2016, with just about a 20 percent possibility of a raise in June priced in. With an advance in commodity prices and regaining worldwide stocks fueling investors’ assets for riskier assets, commodity-linked currencies such as the Australian dollar and Norwegian crown rose significantly against their U.S. counterpart, more hurting the greenback. “It appears that for now, markets are turning their noses up at the prospect that gloomier earnings that might trigger some more negative risk sentiment,” stated a currency strategist in London, telling that the dollar’s sell-off seemed a little “overdone.”
However, with crude prices reaching a 2016 peak above $43 per barrel on Tuesday and the lifting risk appetite, the yen did not need such interference to push it down. “(Higher) oil prices … have got the dollar on the back foot, more than anything else, so we have the yen and the dollar at the bottom, and everything else at the top,” noted macro strategist in London. “I think dollar/yen will get back to 120 at some point – we might want to sell it again there, but I think this move is way overdone,” he added.