US dollar claws back some ground; Bitcoin breaches US$42,000

THE US dollar ticked higher on Monday (Dec 4), regaining some ground after falling for three straight weeks on bets that the Federal Reserve will soon be cutting interest rates, while Bitcoin breached US$42,000 for the first time since early 2022.

The euro was last down 0.2 per cent at US$1.0864, while the US dollar index, which tracks the currency against six major peers, rose by 0.23 per cent to 103.36.

“I think it’s the fact that US policy rate expectations have gone too far and will unwind more in December than rate expectations elsewhere,” said Colin Asher, senior economist at lender Mizuho in London.

Last month, the euro rallied 3 per cent against the US dollar and hit its highest since August at more than US$1.10 as data showed that US inflation was cooling rapidly. The US dollar index dropped 3.1 per cent in November in its biggest monthly fall in a year.

“November was... a very poor month for the US dollar, in part driven by expectations of easier Fed policy,” Asher said. “We see some scope for a reversal into year-end.”

Sterling was down 0.31 per cent at US$1.267 on Monday, while the Australian dollar was 0.41 per cent lower at US$0.6648. The greenback also rose against the Swiss franc, last up 0.33 per cent at 0.8722 francs (S$1.33).

Bitcoin ripped to its highest since April 2022 at more than US$42,100, buoyed by expectations that US regulators will soon approve an exchange-traded Bitcoin fund. Investors’ bets that the Fed’s rate-hiking cycle is over have also boosted riskier assets in financial markets.

Chair Jerome Powell said last Friday that the Fed is prepared to tighten policy further if needed, but also noted that interest rates are “well into restrictive territory” and are slowing inflation.

The US dollar was last down 0.1 per cent against the yen at 146.64, after falling to 146.24 yen per US dollar in the Asian session, its lowest since mid-September.

SEE ALSO

US dollar dips on dovish remarks by Fed chief

“A steady USD decline needs more than just an expectation of Fed rate cuts, it also needs strong growth outside of the US which doesn’t seem to be the case currently,” said Charu Chanana, market strategist at Saxo Markets.

She said the US dollar was likely to have periods of strength during a broad downtrend.

Data on Monday showed that exports from Germany unexpectedly fell in October, denting hopes that Europe’s biggest economy was stabilising.

The key data point for investors this week is the November US jobs report, which is expected to show the American economy added 180,000 jobs last month, up from 150,000 in October.

Currency markets could also be swayed this week by speeches from several European Central Bank officials. ECB president Christine Lagarde is due to give a speech later on Monday.

Eurozone retail sales data are due on Wednesday, ahead of Chinese trade figures on Thursday. REUTERS