Dollar Falls On A 8- Week Low

The dollar flopped to an almost eight-week low versus major peers on Monday amid speculation that U.S. Federal Reserve Chairman Jerome Powell will avoid talk of narrowing bond purchases at a policy meeting this week.

The euro rose to a two-month high against the dollar before data later on Monday forecast to show an upgrade in German business sentiment, which would strengthen hopes for a brighter economic outlook. Powell is likely to face questions over whether an improving labour market and rising coronavirus vaccinations warrant a withdrawal of monetary easing, but most analysts expect him to say such talk is premature, which would put downward pressure on Treasury yields and the dollar.

Analysts at Commonwealth Bank of Australia wrote in a research note, “The dollar is likely to continue to trend lower in line with the gathering momentum in the world economy.” “We expect the Fed policy meeting to be a non-event for the dollar. The U.S. economy is a long way from meeting the ‘substantial further progress’ threshold for the Fed to taper its asset purchases.”

The dollar stood at 107.71 yen, close to its lowest since the beginning of March. The euro rose as high as $1.2117, adding to gains made on Friday after positive data on European services and manufacturing activity.

A survey from Germany’s Ifo institute due later on Monday is expected to show business conditions continued to improve in Europe’s largest economy.

The dollar was little changed at 0.91225 Swiss franc, close to a two-month low.

The Fed’s next meeting ends on Wednesday, and while no major policy changes are expected, investors will pay close attention to Powell’s comments after the meeting.

Rising coronavirus vaccination rates and an improving economic outlook are reasons to be optimistic, but many traders and analysts say Powell is likely to reiterate his commitment to keep easy policy in place for an extended period.