Dollar index ends week lower.
The DXY (US dollar index) attempted to form a base during last week’s trading as a significant support level at 100.18 has acted as support. The 100.18 level is considered important as it pinned the index down during 2015 on two occasions. The first was in March which foresaw a decline below 93.00. The second was in December and with similar results, hitting 92.00.
Dollar index ends week lower – Dollar weakness this week came after the Federal Reserve surprised markets by sticking to their previous rate hike schedule, a stance many market participants expected to alter given improvements in the economy. DXY is on track to close the week with the largest weekly decline since early January and trades at the lowest level since mid-February.
Muted economic optimism.
Although the U.S. dollar largely stabilized Friday it did touch five-week lows during the trading session. The move followed a guardedly optimistic economic view from the Federal Reserve this week as well as concerns that a Group of 20 meeting could stir protectionist trade developments.
Although the U.S. central bank delivered an interest-rate increase as widely expected, it didn’t change earlier forecasts for three rate hikes in 2017, nor did it dramatically upgrade its view on economic growth. Higher rates usually lift demand for the dollar, a move which did not materialise.
“With the Fed officials having drummed up expectations of tighter monetary policy in the past few weeks, the dovish tone that accompanied the rate hike at Wednesday’s FOMC meeting has changed the outlook of the market on the dollar,” said Richard Perry, analyst with Hantec Markets.
“Whether this near term move seen over the past couple of days that has seen key markets such as EUR/USD, Dollar/Yen and gold breaking through key levels, turns into a more considerable move against the dollar will be determined in the next few sessions,” he said.
Friday began meetings among the globe’s G-20 financial leaders in Germany. Analysts have suggested these talks will be among the closest watched by the currency market for years. Attention is focused on hints of a broader push by Washington against the strength of the dollar—such rhetoric could induce immediate market reaction in holding the dollar down. Markets are also tentative around talk that favors U.S. trade protectionism.
Treasury Secretary Steven “Mnuchin is expected to present a softer tone from the U.S., shying away from the protectionist message of Trump’s campaign trail,” said the RBC Capital Markets.