US dollar posts second week of gains ahead of Fed meeting

Published Mon, Jul 26, 2021 · 05:50 AM

New York

THE US dollar on Friday notched a second week of gains, after a few volatile days when currencies moved with shifting risk appetite, as the market shifted focus to the coming Federal Reserve meeting.

Some analysts wondered, though, whether the dollar's recent rally might be losing momentum.

The dollar index, which measures the greenback against a basket of six major currencies, was slightly higher on the day at 92.873. For the week, it was up 0.1 per cent, after rising 0.6 per cent previously. But that was off a 3½ month high of 93.194 hit on Wednesday, bolstered by strong Wall Street earnings that helped investors regain some confidence amid worries that the Delta coronavirus variant could derail the global recovery.

Risk appetite remained high on Friday, with the rise in US stocks, the sell-off in Treasuries, gains in most commodity currencies, and the greenback coming off its peaks.

"Medium-term oscillators and momentum are in sync on the upside suggesting potential higher highs to come, such as 94.30-94.72 (on the dollar index)," said Dave Rosenberg, chief economist and strategist at Rosenberg Research. He also cited the potential of a "Golden Cross" in the dollar index, a chart pattern in which the 50-day moving average crosses above the 200-day moving average, a bullish signal. "Overall, the dollar (index) leans towards further upside which could add to recent pressure in commodity prices and other currencies. Support is at 92.00-91.50," he said.

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So far in July, the dollar has gained 0.6 per cent, after rising 2.8 per cent in June.

US dollar positioning among short-term investors in the week ended July 20 has flipped to net longs for the first time since March 2020.

Against the safe-harbour yen, the dollar rose 0.3 per cent to 110.54 yen.

Meanwhile, the euro was flat at US$1.1775, showing little reaction to the purchasing manager surveys coming out of France, Germany and the eurozone as a whole.

Eurozone business activity expanded at its fastest monthly pace in over two decades in July as the loosening of more Covid-19 restrictions gave a boost to services, but fears of another wave of infections hit business confidence. REUTERS

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