US dollar stuck at multi-month low as Fed dovishly tumbles; euro rises

The US dollar remained at its multi-month lows as the Fed declined cautiously.  Euro rises

The dollar remained stuck against key industry peers at its weakest point since early January on Wednesday as government bond yields fell after the Federal Reserve claimed stimulus measures continue despite current inflationary pressures.

The Euro EUR = EBS traded around the key level of $ 1.2250, retaining gains from Tuesday as it rose to $ 1.2266 for the first time since Jan 8, as the pandemic rebound in Europe gains momentum and closes the gap with the USA.

The dollar index = USD, which measures the greenback against six rivals, fell at 89.663 at the start of the Asian session after hitting its lowest point at 89.533 on Tuesday.

The central bank is expected to keep interest rates on hold, improve economic forecasts and keep policy “patient”, but it is unlikely to say anything positive for the currency.

A multitude of Fed officials repeated overnight Chairman Jerome Powell’s assessment that inflation spikes will be temporary and that ultra-light policies remain warranted.

“I have not yet seen anything that could lead me to change my total support for our accommodative attitude,” said Charles Evans, President of the US Federal Reserve in Chicago, in a speech on Tuesday.

The yen JPY = EBS, which is also sensitive to declines in yields, hovered around the middle of its trading range of around 108.4 to 109.7 per dollar this month and last changed hands at 108.75.

The Chinese yuan rose to $ 6.3925 per dollar in offshore trading on Tuesday, breaking the psychological barrier of 6.4 for the first time since mid-2018.

China’s major state-owned banks bought US dollars for around 6.4 yuan in the Asian afternoon in what was seen as an attempt to cool the onshore yuan rally.

“Amid conflicting reports from Chinese officials over the past few days about their stance on the currency, we read here that 6.40 is not a hard line in the sand and that it will generally be in the context of continued downward pressure on the USD in general. Ray Attrill, National Australia Bank strategist wrote in a report that he could reiterate a forecast of 6.35 yuan per dollar through June.

The yen JPY = EBS, which is also sensitive to declines in yields, hovered around the middle of its trading range of around 108.4 to 109.7 per dollar this month and last changed hands at 108.75.

The Chinese yuan rose to $ 6.3925 per dollar in offshore trading on Tuesday, breaking the psychological barrier of 6.4 for the first time since mid-2018.

China’s major state-owned banks bought US dollars for around 6.4 yuan in the Asian afternoon in what was seen as an attempt to cool the onshore yuan rally.

“Amid conflicting reports from Chinese officials over the past few days about their stance on the currency, we read here that 6.40 is not a hard line in the sand and that it will generally be in the context of continued downward pressure on the USD in general. Ray Attrill, National Australia Bank strategist, wrote in a report reiterating a forecast of 6.35 yuan per dollar through the end of June.

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