Dollar looks stronger as euro and sterling dip

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NEW YORK — The euro and sterling dipped against the dollar on Friday as investors bet

interest rates would stay lower for longer in Europe and Britain while looking ahead to next week’s U.S.

monetary policy meeting.

The dollar index, showing its strongest weekly gain since early May, was last up 0.57% on the day

at 90.5810 while the euro was down 0.63% at $1.2099, on track for its biggest weekly decline since the end

of April.

A day after the European Central Bank stuck to its dovish stance, ECB policymaker Klaas Knot said that

flexible fiscal rules would be needed for years as monetary policy remains constrained.

“ECB policy makers are indicating that inflation rates are way below levels that are needed to put

upward pressure on rates,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in

Toronto.

“That’s cutting away at the euro’s recent rally, putting some downward pressure on it. The biggest

contributor to the move we’ve seen overnight is the (euro) weakness as opposed to idiosyncratic dollar

positive forces. The dollar’s winning the reverse beauty contest,” Schamotta added.

Sterling was down 0.54% at $1.4098 as traders worried about slower-than-expected growth as the

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rapid spread of the Delta variant in Britain raised concerns that much of the country may not be able to

fully reopen from a COVID-19 pandemic-related lockdown on June 21, as previously hoped.

Currency markets had been sluggish all week in anticipation of Thursday’s release of U.S. consumer

prices, which rose 5% year-on-year in May.

But even with the number above expectations, there was little market reaction. Investors seemed to back

the Federal Reserve’s assertion that high inflation would be temporary.

Economists see the central bank announcing in August or September a strategy for reducing its massive

bond-buying program, but do not expect it to start cutting monthly purchases until early next year, a

Reuters poll found.

Traders were still preparing for volatility around the Federal Open Market Committee meeting scheduled

for the week ahead, according to Greg Anderson, global head of foreign exchange strategy at BMO Capital

Markets

“If you’re starting from a position where you’re already short dollars, since FOMC meetings often have a

lot of volatility, you might reduce your short for risk management purposes,” Anderson said.

Meanwhile investors left riskier currencies such as the Australian dollar, which was down 0.72%

at $0.7697 after hitting its lowest level for the week while the New Zealand dollar was off 1.01% at $0.7123

after touching its lowest level since May 4.

In cryptocurrencies, bitcoin, which recovered slightly in recent sessions, was on track for a 3% weekly

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gain and last up 0.3% at $36,817.94 on the day. Ether was last down 3% and set for an 11.7% weekly drop

. Both are still trading significantly below their earlier peaks.

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Currency bid prices at 2:34PM (1834 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 90.5810 90.0740 +0.57% 0.667% +90.6120 +89.9510

Euro/Dollar $1.2099 $1.2176 -0.63% -0.97% +$1.2193 +$1.2093

Dollar/Yen 109.7350 109.3300 +0.38% +6.22% +109.8350 +109.3000

Euro/Yen 132.77 133.08 -0.23% +4.61% +133.4100 +132.6700

Dollar/Swiss 0.8992 0.8946 +0.49% +1.61% +0.9000 +0.8933

Sterling/Dollar $1.4098 $1.4176 -0.54% +3.20% +$1.4185 +$1.4095

Dollar/Canadian 1.2172 1.2095 +0.65% -4.41% +1.2177 +1.2080

Aussie/Dollar $0.7697 $0.7753 -0.72% +0.06% +$0.7775 +$0.7689

Euro/Swiss 1.0880 1.0892 -0.11% +0.68% +1.0901 +1.0875

Euro/Sterling 0.8579 0.8587 -0.09% -4.01% +0.8605 +0.8569

NZ $0.7123 $0.7196 -1.01% -0.81% +$0.7210 +$0.7116

Dollar/Dollar

Dollar/Norway 8.3475 8.2620 +1.08% -2.75% +8.3595 +8.2650

Euro/Norway 10.0985 10.0700 +0.28% -3.52% +10.1135 +10.0611

Dollar/Sweden 8.3289 8.2484 +0.42% +1.62% +8.3351 +8.2368

Euro/Sweden 10.0783 10.0362 +0.42% +0.02% +10.0812 +10.0409

(Additional reporting by Elizabeth Howcroft in London; Editing by Emelia Sithole-Matarise, Will Dunham and

Pravin Char)

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