- Fed minutes helped the US dollar to stage a rally yesterday.
- Dollar fails to share the bullish enthusiasm today, even with the risk-off mood among equities.
- Thai baht trades weak.
Dollar bears were disappointed by the lack of dovish remarks in the latest Fed minutes released during Wednesday’s US session. The sellers were on the back foot – after many recent victories – when the dollar surged to its biggest one-day gain since March.
The dollar index hit 93.159, trading against a basket of currencies, above one Percent from Tuesday’s two-year low.
The dollar bulls couldn’t sustain the pullback in today’s Asian session even though the equities exhibited a distinct risk-off mood.
The Korean Won suffered a 0.4 Percent drop along with the decline in the Kospi share index. Thai baht had a stressful day today as anti-government protests worried the investors, resulting in a three-week low of 31.44 per dollar for the currency.
Regarding the US dollar trading, speculations were rife that the Fed would seek to push the inflation above two Percent, to make up for the years it has been trading under that mark.
The Fed also didn’t checkout capping the government bond yields.
The minutes just touched upon a revised statement on policy strategy at some point, without providing any timing or quantum details.
The New Zealand dollar shed 1.3 Percent from its intraday high to trade at 0.6567 US dollars. The Australian dollar was trading at 0.7185 dollars after hitting an 18-month high of 0.7275 dollars, before the Fed minutes.
The euro was trading at 1.1849 dollars while the pound was back at 1.3106 dollars. The US dollar rose by 0.7 Percent against the Yen, at 106.00.
The failure of the dollar to rally during the Asian equity sell-off suggests that investors prefer to wait on the sidelines and consider the bearish trend to have further legs to it. Last week, the short-bets against the US dollar were now the highest level since 2011. Along with that, the long bets in euro also had risen to a record high.
Analysts opine that the recent bounce back in the dollar would be short-lived and it was just a breather rally in between a firm downtrend in the greenback.
Commonwealth Bank of Australia upped its forecasts of Aussie, kiwi, pound and the euro against the US dollar. Euro could touch 1.26 dollars by September 2021, according to the bank.
The gloomy mood in the Fed minutes also affected investors’ psyche, and it will act as a backdrop when the Philadelphia Fed business index comes in today.
The Fed followers will be now watching whether more will be revealed at the Aug. 27-28 virtual Jackson Hole symposium or at September’s meeting.
Chinese Yuan was at 6.9218 per dollar in onshore trading, as the country, as expected, didn’t change its benchmark interest rates.