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Dollar gains as traders weigh bets on Fed rate hike

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News Tech: The dollar rose slightly on Monday as traders continued to hold the dollar but felt the Fed’s tightening plan was heavily priced in. The surprise rate cut in China has highlighted it as an outlier as other major central banks are in talks to raise rates. China’s move only temporarily weighed on the renminbi. The US Dollar Index, which fell sharply last week before Friday’s jump, rose 0.1% to 95.323 by 1340 GMT. The cash treasury market was closed on Monday for a holiday. Goldman Sachs told clients, “With 3.7 Fed rate hikes in 2022 and 2.3 in 2023 priced in, market participants should see policy pricing risks more balanced.

With no major eurozone economic data due this week, investors should focus on speeches by President Christine Lagarde and other ECB members, as well as the minutes of his ECB meeting on Thursday, December. European Central Bank President Christine Lagarde said the central bank was ready to take the necessary steps to bring inflation down to its 2% target. Inflation last month he rose to 5%, a record high for 19 currency zones. ECB Governing Council member Isabel Schnabel said in comments published Friday that interest rate hikes in the Eurozone would not weigh on higher energy prices.

The Fed will meet on January 25th and 26th, but no interest rate change is yet scheduled. Speculative net long positions in the US dollar, or bets that the dollar will rise, fell in the week ending Jan. 11 but remain close to recent highs, reflecting the Fed’s “hawkish rhetoric in recent months”. suggests investors are buying US dollars, Rabobank told clients. “However, last week’s US dollar sell-off in the physical market suggests that long positions are crowded,” Rabobank analysts said. The euro fell 0.2% against the dollar to $1.1396 after he rose to a two-month high on Friday.

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In addition, the opportunity for tightening is increasing. Even the very accommodative Bank of Japan is debating how soon it should start telegraphing its rate hike plans. The outlier was in China, where many economic data confirmed the weakening impact of coronavirus restrictions on consumer spending, prompting Beijing to ease monetary policy. The renminbi initially weakened as government bonds rose following rate cuts, before trading firm against the dollar at 6.3490. The pound fell 0.2% against the dollar to $1.3651 after rising to its highest level since the end of October last week.

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