Home Business News Dollar retreats while yen and yuan rebound

The US dollar retreated to a certain extent after recording some gains last week. The currency remains on a solid trend after surpassing its June peak but could see some pressure over the short term.

The resilient US economy could continue to provide some support while traders consider the next steps in monetary policy.
Next week’s Federal Reserve meeting will be closely monitored.

The central bank will announce its decision regarding interest rates while its president could deliver new clues to the market as to where monetary policy is headed. While markets expect the Federal Reserve to leave interest rates unchanged this month, this week’s inflation and job market data releases could strongly affect estimates and could fuel volatility in the market.

The USD could also see strong volatility against the euro as the pair could be affected by the European Central Bank’s interest rate decision on Thursday this week. The central bank is expected to leave rates unchanged but some risks of another hike remain.

The Chinese central bank continued to support its currency which gained strongly against the dollar. Successive interventions could weigh on the dollar’s direction which has been climbing against the yuan since the beginning of the year.

Similarly, the Japanese yen rose after the Bank of Japan commented on the possibility of raising rates in the future. Such a move could help reduce the interest rate spread with other currencies.

In addition, the yen has previously seen slower declines as risks of a central bank intervention weighed in its favor.

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