Around 10:10 p.m., the greenback dropped 0.56% once morest the single currency, at 1.0145 dollars for one euro.
The dollar lost ground once morest most major currencies on Monday, hurt by further profit taking, a return of risk appetite and the prospect of a less brutal US central bank (Fed) than expected.
Around 8:10 p.m. GMT, the greenback dropped 0.56% once morest the single currency, at 1.0145 dollars for one euro. The currency which replaced the ecu in 1999 even reached as high as 1.02 dollars, for the first time in ten days.
“The dollar had gone a little fast, a little far, in recent days, so there is some profit taking by some traders,” commented Juan Manuel Herrera of Scotiabank.
The retreat of the “greenback” is also attributable, according to the analyst, “to the fact that expectations of a one-point increase in the rate of the Fed (American central bank) have calmed down”.
After the publication, last Wednesday, of the American price index CPI well above expectations, the market was suddenly packed for the hypothesis of such an increase, which would have been a first in the modern era.
But good macroeconomic indicators and comments from members of the Fed brought operators back to their initial scenario, namely an increase of 0.75 points at the next meeting of the Fed’s Monetary Committee, on July 26 and 27.
Nevertheless, the market believes more than ever in the idea of a tough treatment by the Fed in the short term, and anticipates a further rise of 0.75 points at the September meeting, i.e. the third in as many deadlines, while he only expected half a point a week ago.
“This means that by acting faster (than expected), they might not have to go as high,” says Juan Manuel Herrera. “More ups today might mean fewer ups later, so the impact on the dollar is ambiguous.”
As for the lower probability of a rise of one point this month, it allowed the rebound of the markets, which believe more in a soft landing of the American economy, “factors which weakened the dollar, judged safer”, and revived the appetite for risk, underlined, in a note, Joe Manimbo, of Western Union.
However, the respite might be short-lived for the euro, which has started a difficult week.
On Thursday, the European Central Bank (ECB) should raise its key rate for the first time since 2011, but it will remain negative (from -0.50% to -0.25%) and still very far from those of many major central banks, primarily the Fed (currently between 1.50% and 1.75%).
Thursday might also mark a new episode in the energy crisis in Europe, as uncertainty hangs over the scheduled restart of the Nord Stream gas pipeline, currently stopped for maintenance work, which carries most of Russia’s gas to Europe.
The day before, the head of the Italian government Mario Draghi must indicate to Parliament whether or not he intends to remain in office, the 5 Star Movement (M5S) having called into question the political alliance which allowed him to govern.
“So there are a lot of major events this week that might weaken the euro,” warns Juan Manuel Herrera.
Elsewhere on the foreign exchange market, the dollar is maintaining its grip on certain currencies, notably the Indian rupee, which for the first time in its history came close to 80 rupees to the dollar.
