The dollar is trading in a range, eyes on the next moves of major central banks
The dollar was confined to a narrow trading range on Friday as traders contemplate the next moves by major central banks ahead of a US Federal Reserve meeting next week.
The euro fueled the losses after European Central Bank President Christine Lagarde crushed expectations that policymakers would start to consider cutting bond purchases amid improving economic prospects.
Fed Chairman Jerome Powell will likely repeat Lagarde’s message that it is premature to talk about tapering, which would put downward pressure on Treasury yields and cap the dollar’s gains against most currencies. “Powell must reiterate the pursuit of easy monetary policy, as must Lagarde,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
“As a result, the dollar is likely to fall against the yen, but the broader dollar trend is still mixed. The dollar may rise further against commodity currencies if commodity prices start to fall again.”
The dollar settled at 107.90 yen, near a seven-week low. The euro bought up $ 1.2017 after falling 0.2% on Thursday. The British pound was listed at $ 1.3842 after losing 0.6% in the previous session. The dollar was little changed at 0.9169 Swiss francs.
The next Fed meeting ends on April 28, and while no major policy changes are expected, investors are paying close attention to any comments on the possibility of reducing monetary easing in the future.
Rising coronavirus vaccination rates and improving economic outlook are reasons for optimism, but investors are backing down on expectations of a withdrawal from monetary easing after Lagarde said the Discussions about phasing out emergency bond purchases were premature, analysts said.
Data on manufacturing activity and services in the United States and Germany is due later on Friday, which could support positive economic sentiment, but the dollar and euro are unlikely to move much as investors remain on the sidelines ahead of the Fed meeting, analysts said.
Elsewhere, the Australian and New Zealand dollars stabilized on Friday, but traders said risks were pointed to the downside amid a recent weakening in commodity prices.