By Peter Nurse
Investing.com – Updated at 18:45 GMT
The dollar index decreased by 0.40% to reach the level of 102.105, despite the decline in risk appetite today, and the decline of the main US indices.
The decline comes despite stronger-than-expected US data, which increases the possibility of the Fed raising interest rates during the upcoming meetings. Read the details of the data:
However, statements were issued by the Federal Reserve that may have played a role in the fall of the dollar, and the statements came as follows:
Fed member Philip Jefferson said, yesterday, Monday evening, that once the demand rate declines, inflation will return to the Fed’s target of 2%, and we are still testing inflation and testing the effects of the fiscal tightening imposed by the Federal Reserve by reducing its budget and raising interest rates.
Jefferson refused to comment on the pressures of the banking crisis or talk about the interest rate hike at the next May meeting.
Jefferson asserted that the current rate of inflation is very high and has maintained the high level for longer than expected, and that his goal is to reduce inflation as rapidly as possible. He said that this reduction will take time due to the fact that reducing some inflationary factors needs time.
Jefferson predicted that inflation will return to 2% levels soon, although the components of inflation will continue and the US Federal Reserve will continue to monitor the situation. But it is a signal that we should be careful and avoid causing new damage to the economy.
The US dollar drifted downward in early European trade on Tuesday as a return of confidence in the global banking sector dampened demand for the safe haven.
The decline increased after the statements of the Vice Chairman of the Federal Reserve, Michael Barr, yesterday in his testimony that he gave after the investigation conducted into the collapse of the Silicon Valley bank, which confirmed that the Silicon Valley incident is an isolated incident and will not be transmitted to other banks.
More details here:
At 04:00 ET (07:00 GMT), the dollar, which tracks against a basket of six other currencies, was down 0.2% at 102.320.
The banking sector rose 3.1% on Monday, boosted by news that First Citizens Bankers will acquire deposits and loans from a Silicon Valley bank, which failed earlier this month, as well as reports from Bloomberg that US authorities were considering more support for banks. .
Signs of stabilization in this important sector have reduced demand for the dollar, which is usually considered a safe haven in times of stress.
While the dollar index rose to a three-month high of 105.88 on March 8 before falling To 101.91 last week, with risk sentiment fluctuating with different bank addresses.
The turmoil in the banking sector has also changed market expectations of the potential rate hike path of , with a pause in May now widely expected.
“Markets are becoming increasingly skeptical of the Fed’s ability to tighten policy further, while at the same time speculating on an early start to the easing cycle,” ING analysts said in a note. Fed funds futures are currently priced at just a 30% chance of a rate hike in May while fully priced at a 25bp cut in July, and a total of 80bp of easing by the end of the year.
Elsewhere, it rose 0.2% to 1.0817, with ECB officials keen to stress not only the continued need to tackle inflation, but also the fundamental strength of banks in the region.
Governing Council member Mario Centeno also said on Monday that the ECB should take into account recent financial market pressures when making interest rate decisions, but that “our main focus now is to get inflation under control and bring it down to 2%.”
while remained French Business Confidence is in good shape in March despite the recent turmoil in the banking sector, according to data released on Tuesday, and this follows an improvement in sentiment ecl-132 unexpectedly in March.
It also rose 0.3% to 1.2321, holding its recent strength after the Bank of England Governor said ecl-1975 on Monday that inflation is still the main driver of monetary policy decisions.
showed data from British Retail Consortium, released early on Tuesday, said that overall market price inflation rose to 8.9% in March from 8.4% in February, its biggest increase since records began in 2005.
The risk-sensitive rate rose 0.6% to 0.6689, and fell 0.5% to 130.92, with the yen seen benefiting from some consolidation of overseas earnings by Japanese companies ahead of the end of the Japanese fiscal year on Friday.
The price also fell 0.1% to 6.8816, focusing on } later this week to provide evidence of the state of economic recovery in the country.