The U.S. dollar was firm Monday while the Euro climbed

The U.S. dollar remained broadly steady today as forex markets lacked momentum as traders contemplated volatile rate projections and various central banks’ tolerance of rising inflation. Last week, the U.S. Federal Reserve reiterated that it expects current high inflation to be transitory. Investors are now waiting for U.S. CPI data due on Wednesday to see how that report will influence the Fed’s view.

The dollar index changed insignificantly on the day at 94.229. It traded below the 15-month high reached on Friday thanks to stronger-than-expected U.S. jobs data.

MUFG strategist Lee Hardman stated that the tightening labor market would likely keep pressure on the agency to keep tightening policy in the future and speed up rate hike plans if labor force participation does not improve as the officials expected.

Meanwhile, speculators scaled back their net long position on the greenback for the fourth consecutive week running in the week to November 2, as Commodity Futures Trading Commission data showed. Federal Reserve Vice Chair Richard Clarida plans to speak about monetary policy and inflation later in the session.

ING FX strategists noted that they have heard a few Fed hawks questioning the need for patience when it comes to tightening. However, similar remarks from centrists like Clarida will send U.S. short-term rates and the greenback higher.

How did the Australian and New Zealand dollars fare?

On Monday, the Australian dollar tumbled down by 0.1% on the day at $0.73992. This currency belongs to a risk-off category, and it often declines when the market mood is cautious. On the other hand, the New Zealand dollar surged forward by 0.2% at $0.71395. Prime Minister Jacinda Arden announced that lockdown measures would likely be phased out by the end of the month, boosting the Kiwi. New Zealand plans to ease coronavirus restrictions in Auckland from Wednesday, as vaccination rates soar in the country.

In Europe, the common currency was slightly higher, climbing up by 0.1% at $1.1573. Analysts think that Eurozone inflation will ease next year. According to European Central Bank chief economist Philip Lane, it remains too weak in the medium term. Lane also repeated the bank’s longstanding message about high price growth being temporary.

On Monday, the British pound traded steadily around $1.3486. Last week, the Bank of England surprised forex markets by not hiking rates. Thus, causing the sterling to plummet to a five-week low last week.

What about the Chinese Yuan?

China’s export growth exceeded analysts’ forecasts in October. However, imports missed expectations, resulting in a record trade surplus. Despite that, the Chinese yuan remained steady against the U.S. dollar, trading just under the critical 6.4 level.

Investors are looking ahead to Chinese producer and consumer price data, which is due on Wednesday. According to the forecast, annual producer price growth should show a 12% rally. This report may become a harbinger of further price pressure to come through supply chains worldwide.

Commerzbank senior economist Hao Zhou stated that the strong trade surplus this year should have supported the yuan’s exchange rates, but thus far, the overall theme for the USD/CNY pair is stability.

The EM currencies soared on Monday. Why’s that?

The Thai baht gained the most among Asia’s emerging currencies today, skyrocketing to its highest level in two weeks. Traders are waiting for a policy meeting due this week as the country reopens to visitors after suffering through a coronavirus pandemic.

A robust employment report from the United States, along with the congressional passage of a long-delayed $1 trillion infrastructure bill, also boosted the region’s currency and equity markets.

Moreover, U.S. inflation data is a key focus for Southeast Asian markets this week, considering that it could test the Federal Reserve’s stance on patient rate hikes.

According to Maybank analysts, the U.S. payrolls report was better than expected, but it was not overly strong to suggest that the agency will quicken its normalization stance.

Economists think Thailand’s central bank will try to support the flailing economy by holding interest rates at a record low of 0.50% at its policy meeting on Wednesday, as it struggles to recover from the collapse of its tourism sector.

On Monday, the baht THB-TH surged forward by almost 0.8%, trading at its strongest level since October 26. Indonesian stocks also rallied, along with the rupiah, gaining ground after tumbling down in the last session due to disappointing economic growth figures.