Loonie, Aussie Weaken While US Dollar Continues to Gain

Image Credit: Reuters

 

The Canadian dollar and Australian dollar were in focus on Monday ahead of their respective central bank meetings this week, while the euro and other major currencies lost ground against a strong U.S. dollar.

With a quarter-point rate cut by the Federal Reserve next week almost certain, analysts suggest that the U.S. dollar may be losing momentum after its significant rise over the past four weeks since Donald Trump’s presidential win. Morgan Stanley analysts even recommend shorting the U.S. dollar heading into year-end, noting that much of the dollar's positive momentum has already been priced in, considering strong U.S. economic data and trade/fiscal risks.

Mizuho Bank’s Vishnu Varathan pointed to geopolitical events, like the fall of Syrian President Bashar al-Assad’s regime, and macroeconomic and Trump-related factors, which continue to push markets to stay long on the dollar. “There’s no incentive to short the dollar against any particular currency,” Varathan commented.

Against the yen, the dollar was steady at around 149.93, while the euro fell 0.27% to $1.0537 in Asia, continuing a downward trend. The dollar index rose by 0.24% to 106.20.

Bitcoin, which hit a record $103,649 last week, saw a slight pullback, trading around $99,515.

This week, the European Central Bank (ECB) policy meeting and China's Central Economic Work Conference are key events for investors. A quarter-point rate cut by the ECB is widely expected. Analysts don’t anticipate major stimulus announcements from China until more is known about Trump's plans regarding trade tariffs after his inauguration.

The Bank of Canada (BoC), Reserve Bank of Australia (RBA), and Swiss National Bank (SNB) are all meeting this week. The Canadian dollar is hovering near a 4.5-year low, with markets expecting another significant rate cut. The RBA, the only major central bank yet to cut rates, is not expected to make a move in December, though it may revise growth targets.

The Australian dollar fell 0.12%, nearing its four-month low of $0.6373. The Swiss franc will be in focus as markets speculate on the SNB’s potential rate cut, with a larger 50 basis point reduction more likely, and some even predicting negative interest rates by next year.

U.S. 10-year Treasury yields were at 4.1430%, having fallen after November payrolls data strengthened expectations for a Fed rate cut at its Dec. 17-18 meeting. While the rate cut appears imminent, investors are also watching U.S. consumer price inflation (CPI) data, as a higher-than-expected CPI could influence future rate cuts and impact the U.S. dollar’s direction.

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.