Dollar holds near multi-month highs as Fed meeting in focus

The dollar index eked out a 0.2 per cent gain last week, benefiting from a safe-haven bid on fears a surge in infections of the fast-spreading Delta variant could derail the global recovery, but paring those gains as strong US earnings lifted stocks. — Reuters pic
The dollar index eked out a 0.2 per cent gain last week, benefiting from a safe-haven bid on fears a surge in infections of the fast-spreading Delta variant could derail the global recovery, but paring those gains as strong US earnings lifted stocks. — Reuters pic

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TOKYO, July 26 — The US dollar hovered near its strongest level since early April against the euro today, as financial markets looked ahead to the Federal Open Market Committee (FOMC) meeting this week for clues on the timing of stimulus tapering.

The greenback was also close to a 12-day high on the safe-haven yen as record-high US equity markets buoyed risk sentiment. The dollar index, which measures the currency against six major peers, stood at 92.920 at the start of the week, off from last week’s 3-1/2-month high of 93.194. It was still up about 3.8 per cent from a recent low on May 25 as an improving US economy bolstered the outlook for the Federal Reserve to start paring asset purchases as early as this year.

Commonwealth Bank of Australia projects the dollar can continue to strengthen this week on the possibility of the Fed moving a step closer to tapering at the conclusion of its two-day policy meeting on Wednesday.

“We expect the FOMC to drop ‘substantial’ from ‘substantial further progress’” in its guidance on the necessary conditions for the labour market before removing monetary support, CBA strategist Joseph Capurso wrote in a client note.

“Removing ‘substantial’ will signal the FOMC believes it will soon be appropriate to taper asset purchases,” setting up a possible announcement of a taper in September, he said.

The risk to such an outlook is the rise in Covid-19 cases in the United States, coming after the Fed at its last meeting on June 16 dropped a reference to the coronavirus as a drag on the economy.

The dollar index eked out a 0.2 per cent gain last week, benefiting from a safe-haven bid on fears a surge in infections of the fast-spreading Delta variant could derail the global recovery, but paring those gains as strong US earnings lifted stocks.

The dollar last traded little changed from Friday at US$1.17655 (RM4.97) per euro, near the high from last week of US$1.1752, a level not seen since April 5.

It bought ¥110.56 (RM4.23), approaching the peak of 110.58 from Friday, which was the highest since July 14.

Elsewhere, the Australia dollar slipped 0.1 per cent to US$0.7356, after dropping to an almost eight-month low of US$0.72895 last week as half the country’s population languished under Covid-19 lockdown.

The British pound changed hands at US$1.3745, little changed from last week, when it bounced as high as US$1.3787 from an almost six-month low of US$1.35725 touched just two days earlier.

In cryptocurrencies, bitcoin extended its gains from near US$29,000 last week to push back over US$36,000 on Monday for the first time since June. It last traded about 1.6 per cent higher at US$35,959.48.

Smaller rival ether was last up 2.6 per cent at US$2,250.58, recovering from as low as US$1,717.17 last week. — Reuters

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