Featured # Markets | 4 years ago

Dollar Gains on Firmer Stocks, China Figures

On Wednesday, the dollar mounted to a two-week high against a basket of major currencies, since advances in worldwide stock markets and positive figures from China led investors into riskier bets than low-yielding currencies in Europe and Japan. The euro and yen have increased significantly against the greenback in recent weeks as investors wanted conventional safe havens for their money on a depressive estimate for banks and economic growth. U.S producer prices and retail sales numbers which jointly below expected in March temporarily pushed the dollar lower, but Wednesday’s dollar upward trend keeps unchanged. “The weak retail sales and PPI (producer price index) data had virtually no impact on the dollar, and it’s probably because that there are portfolio flows going into U.S. equities,” noted a currency strategist. “This is giving the dollar a bit of a bid.”

The forecasts for the greenback remained low. After climbing progressively for 1-1/2 years among U.S. interest rate raise forecasts, the dollar has reached a ceiling and many in the market expects that the dollars’ long-term regain is close to end. Forecasts of an agreement to hold up crude production, and what looks like a bottoming out of forecasts for U.S. interest rate hikes, have also benefited the greenback. It gained 0.5 percent to 109.08 yen, off from lows of 107.61 touched on Monday. “The expectation for Fed rate hikes is incredibly low,” stated an analyst. “It doesn’t take much to push them higher.” Further, the euro lost 0.9 percent against the dollar to $1.1278. It dropped to a two-week low of $1.1274.

“Obviously when sentiment is better and (interest rate) carry trades are put in place you should see the euro and yen weaken,” said a chief investment officer. “The yen may weaken from here. But whether that translates into dollar strength I don’t know. We have just started the results season and it is looking like quite a bad quarter. The futures market does not believe that there will be more than one rise in U.S. rates this year,” he added. During the day, crude dropped over than 1 percent. However, oil keeps above $40 a barrel, which has led all three currencies to rallied from long-term lows reached in January. The dollar index climbed 0.8 percent at 94.705, advancing for the first time over past four days.

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