Thursday, 21 February, 2019

Dollar rises but set for big monthly drop; euro falls

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Nellie Chapman | 31 January, 2018, 14:15

The US dollar had its steepest decline since 2003 last year, and the slump has gathered pace this year.

He added, however, that the dollar is still "very much in a long-term downtrend". The dollar increased marginally after the report.

There is a lot of speculation as to why the U.S. Dollar is going down when fundamentals and tightening monetary policy would seem to support it, not to mention the attractiveness of the United States stock market, which should attract foreign currency to flow into USD.

Analysts expect the Fed to hold interest rates steady at the end of the meeting on Wednesday, but strike a hawkish tone in its statement, which would typically be positive for the dollar.

The US currency experienced its steepest drop since 2003 a year ago, and the drop has gained momentum in early 2018. Additionally, investors may also be increasing bets on an accelerating economy and inflation.

A stronger dollar makes bullion more expensive for the holders of other currencies. Indias gold imports rose 53% to 846 tonnes previous year on strong domestic demand and lower global prices, according to MMTC-PAMP India, media reports stated.

Additionally, gold does not pay interest so when rates rise, investors sell gold then move the proceeds into interest-bearing instruments. Investors will be closely watching central-bank signals after the Fed's two-day monetary policy meeting later this week, as well as data on manufacturing and unemployment.

Shalett warned that "r ecent jawboning by the US Treasury secretary for an even weaker dollar, combined with the administration's sabre-rattling on trade on top of the deficit financed tax cut, raises serious risks".

The US 10-year Treasury yield reached a peak of 2.733 per cent in Asian trading on Tuesday, the highest since April 2014, and last stood at 2.712 per cent.

"However, gold's weakness due to a stronger dollar and equity markets could be temporary", said Hareesh V, head of commodity research, Geojit Financial Services.

"But in 2017, relative yield differentials started to fade as a dollar determinant, replaced by capital flows".

Meanwhile, Asian shares extended their bull run amid upbeat corporate earnings and strong global economic growth.