Trading
Dollar retreats as investors reach for riskier currencies
Global Banking & Finance Review®
Company
By Saqib Iqbal Ahmed
NEW YORK (Reuters) – The U.S. dollar eased across the board on Thursday, ceding some of the ground gained in recent sessions as firmer risk sentiment prompted investors to reach for higher-yielding currencies.
Stock markets around the world were largely stronger on Thursday after recent weakness, as bets Saudi Arabia may boost crude production cooled oil prices, helping balance concerns over surging inflation and monetary policy tightening.
“There are a few factors working against the greenback today, but it’s mostly risk-on sentiment,” said John Doyle, vice president of dealing and trading at Monex USA.
News that Saudi Arabia may pump more oil and reports that China will ease some COVID restrictions are helping bolster risk sentiment, to the safe-haven dollar’s disadvantage, Doyle said.
Oil prices were little changed, erasing losses made early on Thursday after OPEC+ agreed to boost crude output to compensate for a drop in Russian production.
Shanghai sprung back to life on Wednesday after two months of bitter isolation under a strict COVID-19 lockdown, with shops reopening and people going back to offices, parks and markets.
The U.S. dollar currency index, which tracks the greenback against six major currencies, was 0.4% lower at 102.11, on pace to snap a two-day streak of gains.
The dollar found little support from data showing U.S. private payrolls increased far less than expected in May, which would suggest demand for labor was starting to slow amid higher interest rates and tightening financial conditions, though job openings remain extremely high.
Riskier currencies, including the Australian and the New Zealand dollars, advanced against their U.S. counterpart, rising 0.74% and 0.66%, respectively.
The Canadian dollar edged higher against the greenback, a day after the Bank of Canada raised rates and opened the door to an even faster pace of interest rate hikes.
The Swiss franc was 0.2% higher against the dollar after Swiss prices increased by the most in 14 years during May, with Switzerland becoming the latest country to be hit by more expensive fuel and food costs plaguing economies around the world.
In cryptocurrencies, bitcoin was about flat a day after dropping 6%, as the world’s largest digital currency by market value continued to struggle to overcome a bout of selling pressure that has engulfed it in recent weeks.
(Reporting by Tommy Wilkes; Editing by Mark Potter, Kirsten Donovan and Jan Harvey)
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another. It is the largest financial market in the world, where currencies are bought and sold.
Monetary policy is the process by which a central bank manages the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Currency hedging is a financial strategy used to protect against the risk of currency fluctuations. It involves taking an offsetting position in a related currency to reduce potential losses.
Economic growth refers to an increase in the production of goods and services in an economy over a period of time, typically measured by the rise in gross domestic product (GDP).
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation, and avoid deflation, to keep the economy running smoothly.
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