The U.S. dollar traded near multi-month lows on Tuesday. Soaring commodity prices boosted exporters’ currencies. However, caution about U.S. inflation bringing forward rate rises kept the dollar from tumbling lower.
The Australian dollar traded steady around $0.7831, near Monday’s two-month high. The Canadian currency also hit an almost four-year high on Monday, and today it remained at C$1.2096 per dollar. The New Zealand dollar exchanged hands near its highest point since February.
Meanwhile, the British Pound continued trading near its highest point since March against the dollar and strongest point since early April versus the euro. Investors were hopeful due to forthcoming lockdown easing, along with receding risks of another Scottish independence referendum.
Looming U.S. consumer price figures due on Wednesday kept in further check moves on the market, however. Investors worry that a big number might push the Federal Reserve to rewind monetary policy support sooner than expected.
How Did the Euro Trade on Tuesday?
The euro remained broadly steady at $1.2142 today after skyrocketing to a two-month high on Monday. The Japanese yen also stood at 108.81 per dollar.
On the other hand, the South Korean won, and the Taiwan dollar tumbled down, along with decreases in their tech-heavy stock markets and a selloff in growth stocks in Asia and on Wall Street due to inflation concerns.
Bank of Singapore currency analyst Moh Siong Sim stated that there are many cross-currents, as soaring commodity prices boost commodity currencies while simultaneously adding to the inflationary pressure that has got risk assets jittery. He added that the question is whether the Federal Reserve can be comfortable staying dovish. If inflation rises more than the agency expects, what happens to the Fed then?
U.S. year-on-year inflation may hit 3.6% in April, bolstered by the base effect of a coronavirus pandemic year contraction. Thus far, Fed Chair Jerome Powell has shown every sign of staying patient on policy, even with the economy running hot.