The U.S. dollar stabilized after three-day drop

After three straight days of dip, the U.S. dollar stabilized on January 22, while other riskier currencies lost out.

The American currency had dropped versus a basket of other currencies for the past three sessions. Market enthusiasm about U.S. President Joe Biden’s fiscal stimulus plans inspired traders to try riskier assets. Another essential thing to mention is that risk-sensitive currencies, such as the New Zealand and Australian dollar, are both boosted.

However, that trend paused on December 22 as market sentiment pulled back, global shares slipped off record highs, and the greenback steadied. Since mid-December, the dollar touched at 90.118 at 0840 GMT and was still on track for its most tremendous weekly loss.

Investors will closely watch Flash PMI readings for January to indicate the pace of the global economic revival. Investors have been tracking vaccinations, while much of Europe brought in tighter lockdowns at the start of 2021 to combat a resurgence in coronavirus.

Significantly, data from Japan overnight revealed that factory activity slipped into recession in January. The services sector was more gloomy as emergency measures to stop a coronavirus resurgence hit sentiment.

The Japanese yen declined by nearly 0.1% against the U.S. dollar and settled at 103.65.

Furthermore, the French reading revealed that business activity suddenly reduced in January, as a slowdown in services offset manufacturing growth.

ECB was very carefully controlling the euro exchange rate

On December 22, the euro appreciated after the European Central Bank’s policy rate announcement. Subsequently, the bank announced it might not need to use its full asset-purchase envelope. According to President Christine Legarde, the bank was very carefully controlling the euro exchange rate.

The European Central Bank, which kept interest rates steady on December 21, also pledged to provide more support for the economy if required.

Notably, at 0843 GMT, the euro stood at $1.21725 and set for a 0.8% addition this week.

Meanwhile, the Australian dollar fell after disappointing retail sales data but still saw a weekly gain. At 0844 GMT, it declined by 0.5% on the day at 0.77285.

The New Zealand dollar was down around 0.5% at 0.7184 against the American currency.

The Canadian dollar, which reached a three-year high of 1.2591 against the U.S. dollar in the previous session, changed course and dropped by around 0.4% and settled at 1.2690.