LONDON/NEW YORK: The dollar rose on Wednesday, heading for its highest monthly gain since November 2016, boosted by a surprisingly hawkish shift in the US Federal Reserve’s rate outlook at a meeting earlier this month, as well as concerns about the Delta coronavirus variant’s spread. This month, the dollar has gained approximately 2.6 percent against a basket of currencies, owing in part to the Fed’s attitude. Traders are anticipating a move in monetary policy after Friday’s nonfarm payrolls report in the United States.
The dollar also gained ground when statistics revealed that private payrolls in the United States expanded by 692,000 jobs in June, more than predicted. However, data for May was revised lower, with 886,000 new jobs reported instead of the previously reported 978,000. Private payrolls were expected to grow by 600,000 jobs, according to economists polled by Reuters. “For the time being, the strong dollar story has won out,” said Erik Nelson, a macro strategist at Wells Fargo Securities in New York. “If the US employment report comes in higher than predicted, it will support the narrative that the Fed will remove accommodative measures sooner than planned. That will result in a dollar gain “Added he. According to a Reuters poll of analysts, the US Labor Department is projected to report a creation of 690,000 jobs in June, up from 559,000 in May, and an unemployment rate of 5.7 percent, down from 5.8 percent the previous month.
Investors were particularly concerned about the spread of the Delta variation, which has provoked or planned renewed lockdowns in nations such as Australia, the United Kingdom, and portions of Europe, leading their currencies to struggle. The dollar has risen in value as a result of this. The dollar index, which measures the greenback against a basket of six major currencies, climbed 0.3 percent to 92.319 in mid-morning trading after hitting a more than one-week high of 92.324 earlier. The dollar rose 2.5 percent in the first half of the year, the highest half-year performance since August 2019. The dollar is on track for its strongest month since November 2016, according to Thomson Reuters. https://fingfx.thomsonreuters.com/gfx/mkt/oakpedmxnvr/DXY.png
At US$1.1896, the euro was down 0.2 percent against the dollar. The dollar was stronger against the yen, trading at 110.71 yen. Australian and New Zealand dollars, both risky and commodity-exposed currencies, suffered losses against the greenback. The Australian and New Zealand dollars were trading at US$0.7502 and US$0.6983, respectively, down 0.2 percent. Currency markets appeared to be transitioning from carefully watching the ebb and flow of risk sentiment to a higher sensitivity to interest rates, according to Paul Mackel, global head of FX research at HSBC, creating a shakeout that has strengthened the dollar. During an outlook call, Mackel told reporters, “There’s been a lot of speculative buildup of short dollar positions over the previous couple of months, and we think that these are being washed out.” Last week, statistics indicated the largest drop in the value of bets against the dollar in three months, boosting the greenback as shorts bought dollars to close positions. (Editing by Andrew Heavens, Chizu Nomiyama, and Jonathan Oatis; reporting by Gertrude Chavez-Dreyfuss in New York and Ritvik Carvalho in London)/n
