In Asian trading on Tuesday, the dollar index tumbled and lost the 91 mark for the first time since March 4, falling to 90.89 at press time. Golden Ten Data reported on Monday that the Fed has entered a silent period ahead of its meeting in late April, which, coupled with the state of U.S. economic data this week, could keep the dollar down.
Meanwhile, as the Fed enters the silent period, expectations for a Fed rate hike in the European dollar futures market have fallen sharply in the past two weeks. Also, technical indicators suggest the dollar may have room for further declines.
As the dollar fell, precious metals, crude oil and non-U.S. currencies all took advantage of the opportunity to move higher.
At press time, spot silver touched $26/oz, up 0.81% intraday. Spot gold rose briefly, rising above $1,774/oz.
The New Zealand dollar extended its intraday gain to 0.50% against the U.S. dollar at 0.7210. The Australian dollar stood at 0.78 against the U.S. dollar for the first time since March 18. The British pound hit 1.40 against the U.S. dollar, continuing to hit a new high since March 18.
WTI crude oil futures stood at $64 per barrel for the first time since March 18, up 0.93%. Brent crude oil futures were up 1% intraday at $67.72/barrel.
Valentin Marinov, head of foreign exchange research at Credit Agricole G10, said.
“The fact that the dollar rally has become almost a distant memory and the dollar’s underperformance seems to reflect a clear divergence between the retreat in U.S. bond yields and the prospect of fairly buoyant bond yields elsewhere. This is almost the exact opposite of the trend we saw in March.”
Reuters analysis says both the currency and bond markets are watching two events on Wednesday for clues to the movement in interest rates: a $24 billion tender sale of 20-year U.S. Treasuries and a statement from the Bank of Canada about when it might cut bond purchases and allow for a rate hike. FXSTREET.COM senior analyst Joseph Trevisani said.
“The Bank of Canada may hint at a tightening of monetary policy, thus foreshadowing the future direction of U.S. interest rates. This is the direction the Fed must eventually go.”
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