Dollar Slips, Yen Outperforms Ahead of BOJ on Rates
The dollar traded slightly weaker as President Donald Trump addressed world leaders gathered in Davos on Thursday, calling for lower interest rates in the US and cheaper oil. The yen was the best performer in the Group of 10 as the Bank of Japan is set to decide on rates Friday.
The Bloomberg Dollar Spot Index fell 0.2%.
“Equities are definitely cheering comments from Trump on pushing for lower interest rates, but that’s not great news for the dollar,” said Helen Given, a foreign-exchange trader at Monex. “It’s not likely that Trump will realistically have much sway on any potential rate cuts from the Fed, but a push for lower rates especially in the face of heavy tariff proposals would make for an interesting mix for USD moving forward”.
“Dollar bears are far more common, albeit less vocal, than investors may think,” Morgan Stanley strategists including David Adams wrote in a note. “Many have dry powder and are waiting for a sign to enter shorts; we think DC fiscal negotiations and inflation data leading into March are both potential catalysts for them to enter”.
USD/JPY declined 0.4% to 155.94; the BOJ kicked off a two-day policy meeting, where policymakers are expected to decide on a rate hike, while forward guidance is seen neutral-to-dovish.
USD/CAD fell 0.2% 1.4354.
Canadian consumers appear to have embraced falling interest rates and ended the holiday season with the strongest spending in nearly two years.
Bank of Canada to decide on rates next week.
EUR/USD rose 0.1% to 1.0423; traders are placing big options bets on the ECB delivering at least one half-point cut to interest rates by the middle of the year.
“There’s likely to be a test of parity pretty soon in euro-dollar,” Sinead Colton Grant, chief investment officer at BNY Wealth, said Thursday. “We’re probably just a few weak data points away from that for the Eurozone”.
GBP/USD climbed 0.4% at 1.2364; market focus also looking ahead to preliminary PMI figures for January due Friday.
Source: Bloomberg
