Forex
US dollar rises slightly after Biden ends presidential campaign
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The U.S. dollar was slightly higher on Monday in quiet trading overall, as investors digested U.S. President Joe Biden’s decision to end his re-election campaign, a scenario which could inject more volatility into the currency market.
Against the yen, however, the dollar weakened after two straight days of gains.
Market participants also looked to next week’s crucial Federal Reserve and Bank of Japan monetary policy meetings. The Fed could signal it is ready to start its easing cycle by its next meeting in September, while the BOJ, in contrast, could start to raise interest rates, giving the yen a bit of a boost.
Investors, however, remained fixated on the U.S. presidential race.
The dollar and Treasury yields fell slightly earlier on Monday, a day after Biden announced he was ending his re-election campaign, but that has since been unwound. Former President Donald Trump, the Republican nominee, sits well ahead in betting markets.
“Overall, these moves still suggest investors are, for the most part, looking to (Donald) Trump’s first term as the best available guide for what to expect from a potential second one,” wrote Jonas Goltermann, deputy chief markets economist at Capital Economics.
“In other words, higher Treasury yields, a stronger dollar, and a generally constructive environment for equities.”
Biden has endorsed Vice President Kamala Harris to replace him as the Democratic candidate in the Nov. 5 election.
Harris quickly received the backing of many within the party, but several high-profile names stayed quiet, including former U.S. President Barack Obama. Former U.S. House of Representatives Speaker Nancy Pelosi on Monday afternoon officially endorsed Harris.
The – a measure of its value relative to a basket of foreign currencies – rose 0.1% to 104.32.
Amo Sahota, executive director of currency advisory firm Klarity FX in San Francisco said of all the currency pairs, the dollar/Mexican peso had the most tangible reaction to the Biden exit. The dollar was last down 0.6% at 17.925 pesos.
“Even though the polls have narrowed only slightly and not significantly, the peso liked the news that there’s another candidate other than Biden,” Sahota said.
The U.S. election aside, analysts noted that the yen could be at a turning point against the dollar after falling since the beginning of 2024, as the Fed is close to cutting rates and the BOJ is widely expected to tighten monetary policy soon.
The U.S. central bank’s rate-setting Federal Open Market Committee (FOMC) and the BOJ will hold two-day policy meetings on July 30-31. Money markets have nearly fully priced in a Fed rate cut by September.
The greenback fell 0.3% versus the yen to 157.10., while the euro was last flat against the dollar at $1.0886.
Analysts flagged that the European Central Bank offered no concerted pushback at its policy meeting last week on the heavy pricing for a rate cut in September, which remains a strong base case.
The dollar firmed 0.1% to 7.29 yuan in offshore trading after the People’s Bank of China unexpectedly cut the seven-day reverse repo rate to 1.7% from 1.8%, saying the move would improve open market operations and support the real economy. That was followed minutes later by surprise reductions to the one- and five-year loan prime rates.
The Australian dollar, a proxy for China risks, sank 0.7% to U.S.$0.6640, giving up earlier gains following news of Biden’s withdrawal.
In cryptocurrencies, investors are bracing for the launch of exchange-traded funds tracking ether, the world’s second-largest cryptocurrency, over the next few days. Market players, however, are not expecting the massive inflows that bitcoin ETFs garnered when they first launched in January.
“The ether ETF launch is a sign of validation to the space,” said Darius Tabai, the CEO of Vertex (NASDAQ:), a decentralized exchange.
“Whether the ether ETF brings a lot of new money is unclear. itself has become this kind of isolated asset. And there’s not much spillover from bitcoin into the rest of crypto.”
Ether was last down 0.3%% at $3,496, while bitcoin rose 1.8% to $68,182.
Currency
bid
prices at
22 July
08:00
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 104.3 104.22 0.1% 2.89% 104.42 104.
index 18
Euro/Doll 1.0888 1.0883 0.04% -1.36% $1.0903 $1.0
ar 873
Dollar/Ye 157.08 157.48 -0.24% 11.38% 157.615 156.
n 3
Euro/Yen 1.0888 171.38 -0.21% 9.89% 171.65 170.
08
Dollar/Sw 0.8895 0.889 0.06% 5.69% 0.8902 0.88
iss 71
Sterling/ 1.2929 1.2911 0.15% 1.61% $1.2942 $1.0
Dollar 873
Dollar/Ca 1.3752 1.3728 0.19% 3.75% 1.3775 1.37
nadian 06
Aussie/Do 0.6641 0.6685 -0.65% -2.59% $0.6702 $0.6
llar 632
Euro/Swis 0.9682 0.9672 0.1% 4.26% 0.9689 0.96
s 57
Euro/Ster 0.8418 0.8422 -0.05% -2.88% 0.8431 0.84
ling 14
NZ 0.5978 0.6009 -0.49% -5.37% $0.6027 0.59
Dollar/Do 72
llar
Dollar/No 10.9631 10.9225 0.37% 8.17% 11.0062 10.8
rway 781
Euro/Norw 11.9341 11.8737 0.51% 6.33% 11.9695 11.8
ay 58
Dollar/Sw 10.7209 10.6789 0.39% 6.5% 10.7383 10.6
eden 279
Euro/Swed 11.6732 11.6129 0.52% 4.92% 11.6834 11.6
en 001
Investing.com – The US dollar rose in thin holiday-impacted trade Tuesday, retaining recent strength as traders prepared for fewer Federal Reserve rate cuts in 2025.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 107.905, near the recently hit two-year high.
Dollar remains in demand
The dollar has been in demand since the Federal Reserve outlined a hawkish outlook for its interest rates after its last policy meeting of the year last week, projecting just two 25 bp rate cuts in 2025.
In fact, markets are now pricing in just about 35 basis points of easing for 2025, which has in turn sent US Treasury yields surging, boosting the dollar.
The two-year Treasury yield last stood at 4.34%, while the benchmark 10-year yield steadied near a seven-month high at 4.59%.
“We think this hawkish re-tuning of the Fed’s communication will lay the foundation for sustained dollar strengthening into the new year,” said analysts at ING,in a note.
Trading volumes are likely to thin out as the year-end approaches, with this trading week shortened by the festive period.
Euro near to two-year low
In Europe, fell 0.1% to 1.0396, near a two-year low, with the set to cut interest rates more rapidly than its US rival as the eurozone struggles to record any growth.
The ECB lowered its key rate earlier this month for the fourth time this year, and President Christine Lagarde said earlier this week that the eurozone was getting “very close” to reaching the central bank’s medium-term inflation goal.
“If the incoming data continue to confirm our baseline, the direction of travel is clear and we expect to lower interest rates further,” Lagarde said in a speech in Vilnius.
Inflation in the eurozone was 2.3% last month and the ECB expects it to settle at its 2% target next year.
traded largely flat at 1.2531, with sterling showing signs of weakness after data showed that Britain’s economy failed to grow in the third quarter, and with Bank of England policymakers voting 6-3 to keep interest rates on hold last week, a more dovish split than expected.
Bank of Japan stance in focus
In Asia, fell 0.1% to 157.03, after rising as high as 158 yen in recent sessions, after the signaled that it will take its time to consider more interest rate hikes.
edged 0.1% higher to 7.3021, remaining close to a one-year high as the prospect of more fiscal spending and looser monetary conditions in the coming year weighed on the currency.
Beijing signaled that it will ramp up fiscal spending in 2025 to support slowing economic growth.
Investing.com– Most Asian currencies moved in a tight range on Tuesday, while the dollar extended overnight gains as traders positioned for a slower pace of interest rate cuts in the coming year.
Trading volumes were muted before the Christmas break, while most regional currencies were nursing steep losses against the greenback for the year.
Asian currencies weakened sharply last week after the Federal Reserve effectively halved its outlook for rate cuts in 2025, citing concerns over sticky U.S. inflation.
Dollar near 2-year high on hawkish rate outlook
The and both rose about 0.1% in Asian trade, extending overnight gains and coming back in sight of a two-year high hit last week.
While the greenback did see some weakness after data read lower than expected for November, this was largely offset by traders dialing back expectations for interest rate cuts in 2025.
The Fed signaled only two rate cuts in the coming year, less than prior forecasts of four.
Higher U.S. rates diminish the appeal of risk-driven Asian markets, limiting the amount of capital flowing into the region and pressuring regional markets.
Asia FX pressured by sticky US rate outlook
Most Asian currencies weakened in recent sessions on the prospect of slower rate cuts in the U.S., while uncertainty over local monetary policy and slowing economic growth also weighed.
The Japanese yen’s pair fell 0.1% on Tuesday after rising as high as 158 yen in recent sessions, after the Bank of Japan signaled that it will take its time to consider more interest rate hikes.
The Australian dollar’s pair fell 0.2% after the minutes of the Reserve Bank’s December meeting showed policymakers saw an eventual easing in monetary policy, citing some progress in bringing down inflation. But they still flagged potential upside risks for inflation.
The Chinese yuan’s pair rose 0.1% and remained close to a one-year high, as the prospect of more fiscal spending and looser monetary conditions in the coming year weighed on the currency.
Beijing signaled that it will ramp up fiscal spending in 2025 to support slowing economic growth.
The Singapore dollar’s pair rose 0.1%, while the Indian rupee’s pair rose 0.1% after hitting record highs above 85 rupees.
Investing.com — The dollar has surged past its post-2022 range, buoyed by U.S. economic exceptionalism, a widening interest rate gap, and elevated tariffs, setting the stage for further gains next year.
“Our base case is that the dollar will make some further headway next year as the US continues to outperform, the interest rate gap between the US and other G10 economies widens a little further, and the Trump administration brings in higher US tariffs,” Capital Economics said in a recent note.
The bullish outlook on the greenback comes in the wake of the dollar breaking above its post-2022 trading range, reflecting renewed confidence among investors driven by robust U.S. economic data and policy expectations.
A key risk to the upside call on the dollar is a potential economic rebound in the rest of the world, similar to what occurred in 2016, Capital Economics noted.
Following the 2016 U.S. election, economic activity in the rest of the world rebounded, while Trump’s tax cuts didn’t materialize until the end of 2017, and the Fed took a more dovish path than discounted, resulting in a 10% drop in the DXY on the year, which was its “worst calendar year performance in the past two decades,” it added.
While expectations for a recovery in Europe and Asia seem far off, a positive surprise for global growth “should be ruled out”, Capital Economics said.
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