Dollar Set to Snap Losing Streak After Swagger Returns Ahead of Fed Meeting By Investing.com

0
21

© Reuters.

By Yasin Ebrahim

Investing.com – The dollar jumped Friday, and is set for its first weekly gain in three weeks as the prospect of fresh clues on Federal Reserve monetary policy and weakness in the euro has restored some swagger to the world’s reserve currency.

The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.51% to 90.54.

There are just days to go until the Federal Reserve’s two day meeting on Tuesday and Wednesday, and recent hot inflation report is likely to get the conversation started on tapering. This is good news for the yields and the dollar.

“The discussion about a Fed exit from bond purchases in the face of rising inflationary pressures should drive the yield on ten-year Treasuries to 2%,” Commerzbank (DE:) said in a note. “For the dollar, we see upside potential in the short term due to the economic boom in the US.”

But the lift to the dollar will only hold out as long as inflation delivers its end of the bargain. If the pace of inflation fades, then all bullish bets on the greenback are off.

“If inflation falls again next year, and it becomes clear that the Fed is taking its time with interest rate hikes, we expect yields to fall again somewhat and the dollar to weaken again,” Commerzbank added.

Still, Treasury yields were hovering at unchanged levels on Friday, suggesting the greenback had been given a helping hand from a demise in the euro, which makes up about half of the weighing of the dollar index.  

fell 0.52% to $1.2106.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.