The Dollar Was Down On Tuesday Morning

Investing.com – The dollar was down on Tuesday morning in Asia, with the U.S. Federal Reserve’s new policy framework announced on August 28 fueling bets that rates in the U.S. will continue to remain low compared to those in other countries, and driving the greenback down to lows not seen in several years.

The U.S. Dollar Index Futures that tracks the greenback against a basket of other currencies was down 0.21% to 91.938 by 10:07 PM ET (3:07 AM GMT).

Fed Vice Chair Richard Clarida on Monday expanded on Fed Chairman Jerome Powell's comments indicating a shift in focus to average inflation and higher employment. The framework has triggered a retreat from the dollar, with the Fed now given more scope to keep benchmark rates lower for longer.

“The dollar is weak not only against G10 currencies but also against emerging market currencies...this shows the dollar is in a downtrend that will last for some time. Low rates and an excess supply of dollars are driving this move,” MUFG Bank head of global market research Minori Uchida told Reuters.

Monday's decline in long-term U.S. Treasury yields also hampered gains for the greenback.

Investors are now looking to August’s U.S. manufacturing activity data, due to be released later in the day, with data on durable goods and employment also due later in the week. But even data exceeding forecasts might not be able to counter the dollar's decline against expectations of low rates.

The USD/JPY pair edged down 0.17% to 105.70. The yen was trading within a narrow range as the jockeying in Japan’s prime minister contest continues after incumbent Shinzo Abe tendered a surprise resignation last week. The ruling Liberal Democratic Party’s largest faction is supporting Yoshihide Suga, the current chief cabinet secretary.

The AUD/USD pair rose 0.32% to 0.7399. The Reserve Bank of Australia is due to meet later in the day and is widely expected to make few changes to policy. Investors will be looking for the central bank’s economic outlook amid the recent uptick in COVID-19 cases in the country.

Across the Tasman Sea, the NZD/USD pair gained 0.33% to 0.6754.

The USD/CNY pair edged down 0.19% to 6.8346. China’s Caixin manufacturing Purchasing Managers’ Index (PMI) for August increased to 53.1, beating the forecasted 52.6 prepared by Investing.com as well as July’s reading of 52.8.

Meanwhile, tensions between the U.S. and Taiwan simmered after the U.S. said on Monday that it would establish a new bilateral economic dialogue with Taiwan. Tensions between China and Australia are also heating up over Chinese authorities’ detention of Australian news anchor Cheng Lei, who worked for Chinese government-run station CTGN, in late August.

The GBP/USD pair edged up 0.18% to 1.3393. The U.K.'s manufacturing PMI is due to be released later in the day.

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