Dollar Rally Stalled by Profit-Taking Ahead of Long Holiday
The US dollar weakened in trading on Friday (June 19th) after previously strengthening, as market participants reduced exposure ahead of the long US weekend. The Bloomberg Dollar Spot Index fell around 0.1%, narrowing the index's weekly gain to 0.8%.
Profit-taking emerged after the dollar strengthened following the Federal Reserve meeting. Leveraged fund desks were seen closing long dollar positions after the Tokyo fix, with some stop-losses triggered when the euro moved above $1.1430. Treasury futures were relatively stable as US cash markets were closed for a national holiday.
Sentiment toward the dollar was previously supported by the Fed's hawkish signals and the delay in US-Iran negotiations for a permanent peace deal. However, the combination of long market positions and thinner liquidity made the greenback vulnerable to a short-term correction.
The euro erased early losses and traded steadily around $1.1463, after briefly dropping to $1.1418, near a 10-month low. This movement indicates that pressure on the euro is starting to ease as markets reduce long dollar positions ahead of the US holiday.
The pound also rebounded after a 0.3% decline. GBP/USD rose 0.2% to 1.3234, although the UK market was overshadowed by political dynamics after Andy Burnham won the Makerfield by-election, opening the door to a Labour leadership challenge. The UK 10-year bond yield rose 7 basis points to 4.82%.
In Asia, USD/JPY edged down to 161.29 after touching 161.81 on Thursday, its strongest level since 2024. Concerns about intervention increased after Japanese Finance Minister Satsuki Katayama stated that the government could take firm action against speculative movements. Bank of Japan Deputy Governor Ryozo Himino also highlighted the risk of Japan's price trend moving above its 2% inflation target.
The market's next focus will be on whether the dollar's correction is merely technical ahead of the long holiday or begins to reflect a broader shift in positioning. The Fed's direction, developments in US-Iran negotiations, the risk of yen intervention, and global yields will remain key variables for the foreign exchange market. (arl)
Source: Newsmaker.id
