The U.S. dollar was supported on Monday amid renewed worries about coronavirus restrictions in Asia, but investors are heavily positioned for it to fall while the U.S. Federal Reserve keeps rates low.
Bitcoin skidded to a three-month low after Tesla (NASDAQ:TSLA) Inc boss Elon Musk suggested at the weekend that the car maker is considering selling or may have already sold some of its holdings in the cryptocurrency.
Easing commodity prices and fresh virus outbreaks in Singapore and Taiwan – where COVID-19 had been contained – helped modest dollar gains of 0.3% against the Australian dollar and 0.4% versus the New Zealand dollar. [AUD/]
The greenback was little changed against the euro and the yen, but it remained close to testing major support levels, which if broken could see a return to a downtrend that pressed it lower through April.
A dollar bounce that followed higher-than-expected inflation data last week has also faded as traders figure the U.S. Federal Reserve will keep rates low.
The major Asia-Pacific currencies – Japanese Yen, Australian Dollar, New Zealand Dollar – fell last week, as a rapid rise in U.S. consumer inflation drove Treasury yields and the U.S. Dollar higher on Wednesday. By the end of the week, however, all three currencies rose as Federal Reserve officials played down the impact of higher inflation on monetary policy.
The highlight of the week for the three majors and the U.S. Dollar was the whipsaw buying and selling as investors betting on a rebounding economy squared off against those fearful of inflation.
The U.S. Dollar rose against a basket of major currencies last week with most of the gains coming on Wednesday following a surprisingly strong rise in U.S. consumer prices that drove Treasury yields higher while fanning fears about an increase in inflationary pressure.
Last week, June U.S. Dollar Index futures settled at 90.318, up 0.102 or +0.11%.
European stock markets are seen edging lower at the open Monday, as investors weigh concerns over a rise in global inflation as well as disappointing Chinese economic data.
At 2:05 AM ET (0705 GMT), the DAX futures contract in Germany traded 0.3% lower, CAC 40 futures in France dropped 0.1% and the FTSE 100 futures contract in the U.K. rose 0.4%.
Earlier Monday, data showed that Chinese industrial production grew 9.8% year-on-year in April, a healthy increase but lower than March’s 14.1%, and retail sales increased 17.7% in April year-on-year, below March’s 34.2% growth.
The data showed that China’s economy, the second largest in the world, is continuing to grow but the recovery from the Covid-19 pandemic is uneven and still has a long way to go.
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