Breaking News
Investing Pro 0
💎 Reveal Undervalued Stocks Hiding in Any Market Get Started

Dollar gains as central banks take central stage

Forex Jan 31, 2023 07:24
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) - The dollar rose on Monday, a day before the Federal Reserve was due to begin a two-day policy meeting, while the euro was boosted by unexpectedly high inflation data before the European Central Bank meets on Thursday.

The U.S. central bank is widely expected to hike interest rates by an additional 25 basis points this week, and investors will be watching for any new indications on how many more rate increases are likely.

Fed Chair Jerome Powell is in a "difficult position" because "they're going to raise rates 25 basis points and yet he's going to have to argue against the easing of financial conditions,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

Fed funds futures traders are pricing for the Fed's benchmark rate to peak at 4.94% in June, up from 4.33% now, and then for the central bank to cut it to 4.53% by December. This contrasts with comments from Fed officials, who have said that they will need to keep rates in restrictive territory for a period of time in order to bring down inflation.

The disparity comes in part as traders speculate that a weakening economy, and possible recession, will cause the Fed to pivot to a more dovish policy.

The dollar index has weakened to 102.27 from a 20-year high of 114.78 on Sept. 28 as investors price in the likelihood that the Fed is nearing the end of its tightening cycle. But it has been largely rangebound for the past few weeks as it hits technical support against major currencies including the euro.

The question now is "does the dollar bounce or is this a nesting pattern before the next leg down," Chandler said.

Stronger economic momentum may be needed in order to boost the greenback, strategists at TD Securities said in a report, adding that "a catalyst for reversal will need to come from much stronger data."

"EUR has front-run growth conditions (which have invariably improved) but markets may need something more to fade," they said.

The euro fell 0.22% to $1.0844, erasing earlier gains after Spain's consumer prices rose 5.8% on a year-on-year basis in January, the first increase in six months.

"Today's data will underline expectations for a 50-basis-point hike from the ECB on Thursday and also signal that rates will be moved further up," said Niels Christensen, chief analyst at Nordea.

The dollar rose 0.57% against the Japanese yen to 130.53.

A panel of academics and business executives on Monday urged the Bank of Japan (BOJ) to make its 2% inflation target a long-term goal instead of one that must be met as soon as possible, in light of the rising cost of prolonged monetary easing.

The Australian dollar fell 0.75% to $0.7056 but was on track for a monthly gain of around 3.5% after Australia's inflation rate shot to a 33-year high last quarter, causing traders to ramp up bets that the Reserve Bank of Australia will have to tighten interest rates further.

Sterling dipped 0.43% to $1.2345 ahead of the Bank of England's meeting on Thursday. The BoE and ECB are both expected to raise rates by 50 basis points each this week.


Currency bid prices at 2:45PM (1945 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change


Dollar index 102.2700 101.8900 +0.38% -1.179% +102.3100 +101.6500

Euro/Dollar $1.0844 $1.0868 -0.22% +1.20% +$1.0914 +$1.0840

Dollar/Yen 130.5250 129.8000 +0.57% -0.43% +130.5550 +129.2000

Euro/Yen 141.54 141.11 +0.30% +0.88% +141.9700 +140.5600

Dollar/Swiss 0.9254 0.9215 +0.42% +0.08% +0.9254 +0.9184

Sterling/Dollar $1.2345 $1.2400 -0.43% +2.09% +$1.2416 +$1.2340

Dollar/Canadian 1.3379 1.3311 +0.51% -1.25% +1.3383 +1.3300

Aussie/Dollar $0.7056 $0.7110 -0.75% +3.52% +$0.7120 +$0.7054

Euro/Swiss 1.0033 1.0010 +0.23% +1.39% +1.0061 +1.0006

Euro/Sterling 0.8781 0.8770 +0.13% -0.71% +0.8803 +0.8763

NZ $0.6469 $0.6494 -0.38% +1.89% +$0.6508 +$0.6465


Dollar/Norway 9.9735 9.8805 +1.07% +1.76% +9.9815 +9.8675

Euro/Norway 10.8148 10.7336 +0.76% +3.06% +10.8278 +10.7134

Dollar/Sweden 10.4023 10.3058 +0.94% -0.05% +10.4074 +10.2939

Euro/Sweden 11.2817 11.1769 +0.94% +1.18% +11.2969 +11.1930

Dollar gains as central banks take central stage

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email