Dollar Driven Lower by Fading Rate Expectations

The US Dollar Index earlier struck a 5-week low as investors now expect the US Federal Reserve to hold off on a rate increase until much later in this year, if at all. The Index is used by investors to gauge the greenback’s strength, relative to the weighted average of its major rivals. The Index had edged to a session low of 93.68 .DXY, a price last seen in early May. In individual trading, the greenback was also under heavy pressure, especially against the Yen but also against the Kiwi and Canadian Dollars, which are both benefitting from the recent rally in commodity and oil prices.

As reported at 10:51 am (BST) in London, the USD/JPY was trading at 107.0520 Yen, down 0.27%; the pair has ranged from 106.7150 Yen to 107.3900 Yen in today’s trading. The NZD/USD was up 0.28% at $0.6989; today’s trading range is bounded by $0.6946 at the low end and $0.7006 at the high end. The USD/CAD was down 0.31% at C$1.2718, not too far from the session trough at C$1.2712.

Outlook Dimming for Dollar

For the most part, FX traders seem certain that the Dollar will continue to be pressured by the Fed’s own perception, however the upcoming policy review which takes place on June 14th and June 15th, could change sentiment. The chances of a possible rate hike next month have been lowered substantially and are now at about 26% according to the latest data. Fears of a possible Brexit, that is an exit by Britain from the EU, are also raising uncertainty for a near term rate hike.

Barbara Zigah

After working on Wall Street, Barb began her second career as a freelance writer at Daily Forex, where the CEO recognized fresh, untapped potential and was willing to give her a try. She’s never looked back. Since then, she’s worked steadily as a freelance writer and editor in the financial services and Forex-related industry.