Dollar Drifts Lower Ahead of Fed Minutes
Dollar Index Trades Lower
The U.S. dollar saw a slight decrease in early European trade, giving back some recent gains before the release of the latest Fed minutes. The Dollar Index, which measures the greenback against a basket of other currencies, traded 0.1% lower at 104.067, maintaining its position near three-month highs. The holiday-affected trade has limited activity in the foreign exchange markets on Monday.
Dollar Consolidates After Recent Gains
The U.S. dollar registered gains last week, marking its fifth consecutive positive week. This comes after data showed both U.S. and increased more than expected in January, raising prospects of the Federal Reserve delaying the start of its rate-cutting cycle to the beginning of summer compared to March at the beginning of the year.
Euro Edges Higher; ECB Wage Data in Focus
The euro traded 0.1% higher at 1.0783 in Europe, with traders awaiting the ECB survey of negotiated wage rates. The ECB’s wage data will be of significance given the warnings from policymakers about high wage growth, despite being a well-known lagging indicator.
Sterling Gains Momentum
The British pound traded 0.2% higher at 1.2622, supported by slight dollar weakness and Friday’s data showing U.K. grew at their fastest pace in nearly three years in January.
Yen Remains Close to Key Level
The yen fell 0.2% to 149.94 in Asia, hovering around the psychologically-important 150 level. Traders remain wary of potential government action in currency markets. The yen had tumbled to three-month lows over the past week amid growing conviction that the Bank of Japan will be slow in tightening its ultra-loose monetary policy.
Chinese Yuan Holds Steady
The Chinese yuan edged 0.1% higher to 7.1986, remaining within sight of a three-month low. The central bank is widely expected to keep its benchmark rate unchanged on Tuesday, leaving the rate at record lows.
Overall, the forex market continues to show signs of consolidation and anticipation as traders await key data and events to guide their next moves.
