US dollar slips from 5-week high; Turkish lira drops
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THE US dollar fell slightly from a five-week high on Monday (May 15), after a period of strength that has confused analysts.
The Turkish lira sank to a near record low, as weekend elections looked headed for a run-off, while the Thai baht rallied after a more decisive election result.
The euro was up 0.24 per cent against the US dollar on Monday at US$1.087, rebounding after falling 1.54 per cent the previous week.
That helped send the US dollar index, which measures the greenback against six major peers, down 0.18 per cent to 102.51. That was just below a five-week high of 102.75, touched earlier in the session.
Analysts have said many factors could be behind the US dollar’s recent strength, including concerns about American inflation, as well as fears about the debt ceiling stand-off and global economic growth driving safe-haven buying.
Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said a pick-up in US bond yields over the last two days had supported the currency.
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US yields rose on Friday and Monday, after a University of Michigan survey of consumers’ long-term inflation expectations jumped to the highest since 2011. That put a possible Fed rate hike next month back in play, with traders laying down those odds at 17 per cent.
“US interest rates have risen, as the Michigan inflation expectations were stronger than expected, number one, and number two, (Fed officials) seem to be consistently hawkish by emphasising that the Fed has no plan to cut interest rates,” Tan said.
The US dollar was up 0.3 per cent against Japan’s yen at 136.16, after rising 0.67 per cent last week.
Sterling was 0.44 per cent higher at US$1.25, rebounding after last week’s 1.45 per cent fall.
Traders expect the Fed to cut interest rates sharply by the end of the year, as US growth slows. But Tan said big cuts are unlikely, and that the greenback could rise as traders change their minds.
Other analysts said investors’ concerns about the debt ceiling stand-off were causing them to buy the safe-haven US dollar, ahead of a key meeting between President Joe Biden and congressional leaders on Tuesday.
The US dollar was last up 0.43 per cent at 19.67 Turkish lira. It earlier jumped to 19.7 for the first time since Mar 10, when it hit a record high of 19.8 on a volatile trading day. Turkey headed for a run-off vote after President Tayyip Erdogan outperformed projections.
The US dollar sank 0.56 per cent to 33.79 baht in onshore Thai trading. Thailand’s opposition parties secured a stunning election win on Sunday, but it is far from certain whether they will form the next government, with parliamentary rules written by the military junta.
Many investors expect the US dollar to continue to decline in the coming months as inflation cools and the Fed pauses its rate hikes.
“If you remove the uncertainty around the debt-ceiling situation, the sentiment has been turning bearish against the dollar,” said Khoon Goh, head of Asia research at ANZ. REUTERS
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