The U.S dollar is set for weekly losses against a basket of major global currencies amid a relatively calm trading session prevailing at the currency market
- At the time of writing, the U.S. dollar index was stable around the 91.88 price band; still, it’s critical to note it’s not far from its three-month low of 91.84 it hit overnight.
- Currency traders are moving in droves to riskier currencies amid the significant improving risk urge seen around global investors, which has helped triggered the prices of global equities, energy commodities to go up.
- The U.S currency market was closed on Thursday as it observed the Thanksgiving holiday.
What this means: The greenback has been under increased pressure, taking into consideration global investors, increased their buying pressure on riskier currencies on the bias that a string of COVID-19 vaccines news reports and hopes for a more stable period at the world’s largest economy, had no pressing need to keep their investments in the safe-haven currency.
Quick fact: The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound sterling, Swedish Krona, Euro, etc. Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, would need to pay more dollars in fulfilling such payment obligations.
Stephen Innes, Chief Global Market Strategist at Axi in an explanatory note to Nairametrics, spoke on the market conditions the U.S dollar arch-rival (Euro) is facing right now, taking into account that the prevailing odds are still weighing against the Euro despite its recent demand from traders;
“Just like mice and men, the best-laid plans of forex traders often go awry. Just as the street was making a good argument to “sell the buck” into year-end, the ECB minutes said, please pull in the bullish Euro reigns.
“Dovish headlines from the ECB account of the October meeting, together with a dovish speech from ECB chief economist, seem to be weighing on the euro.
“There is now an interesting dynamic between Lane and ECB board member Schnabel, who, earlier this week, gave a decidedly hawkish speech (emphasizing side effects of non-conventional measures and the need to stretch out the ‘medium-term’).”
Bottom-line: Currency traders’ recent moves in the money market will continue to put the U.S dollar under pressure in the short term amid prolonged risk-on bias currently in play, triggered by COVID-19 vaccine hopes.