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The dollar fell to nearly eight-week lows from major peers on Monday amid rumors that Federal Reserve Chairman Jerome Powell will avoid talking about cutting bond purchases at this week’s monetary policy meeting.
The euro rose to a two-month high against the US dollar ahead of data released later on Monday, which will show improved business sentiment in Germany, which will strengthen hopes for a better economic outlook.
Powell is likely to face questions about whether improved labor markets and more coronavirus vaccinations justify lifting monetary easing, but most analysts expect him to say such talk is premature, putting downward pressure on yields. treasury bonds and dollar.
“The dollar is likely to continue its downward trend in line with the picking pace of global economic growth,” analysts at the Commonwealth Bank of Australia wrote in a research note.
“We expect that the Fed meeting will not be an event for the dollar. The US economy is far from reaching the threshold of “further significant progress” for the Fed to cut back on its asset purchases. “
The dollar was worth 107.71 yen, close to the lowest level since March 4.
The euro rose to $ 1.2117, adding on Friday’s gains following positive data from the European services sector and manufacturing activity.
A study by the German Ifo Institute, which will be released later Monday, is expected to show that the business environment in Europe’s largest economy continues to improve.
The British pound was up 0.2% at $ 1.3902, up 0.3% in the previous session.
The dollar changed slightly to 0.91225 Swiss francs, which is close to a two-month low.
The next Fed meeting will close on Wednesday, and while no major policy changes are expected, investors will pay close attention to Powell’s comments after the meeting.
The rise in coronavirus vaccination rates and the improved economic outlook are cause for optimism, but many traders and analysts say Powell is likely to reaffirm his commitment to ultra-soft policies over the long term.
“He recently said the Fed is unlikely to start raising rates until 2022,” Royal Bank of Canada strategist Alvin Tan wrote in a note to clients.
“Although we think this opinion will be challenged next year, (he) will probably continue to repeat it this week.”
US funds were selling the dollar against the yen in Asian trading, which is an additional sign that large investors expect lower US Treasury yields to push the dollar down, some traders in Tokyo said.
In emerging markets, traders are monitoring the Turkish lira to see if it can test its all-time low of 8.58 per dollar due to deteriorating relations with the United States and concerns about a easing of policy by the new central bank chief. The lira was last quoted at 8.4225.
The continental yuan climbed to 6.4889 per dollar, just below a six-week high.
The Aussie and New Zealand dollars rose to monthly highs, traders said, but are likely to track changes in global commodity prices.
In the cryptocurrency market, Bitcoin rebounded to $ 53,000, up 9%, while Ether, a smaller cryptocurrency, surged 7% to $ 2,480, offsetting some of its losses from last week caused by US President Joe Biden’s plan to raise taxes on gains. capital for wealthy investors.