Dollar Cautiously Firm Ahead Of Busy Central Bank Week As Ringgit Ticks Higher

The dollar firmed on Monday and distanced itself from an eight-month trough ahead of a slew of central bank meetings this week, including the Federal Reserve’s, with traders keenly focused on guidance for the path of interest rate rises.

The U.S. dollar index , which measures the greenback against a basket of currencies, rose 0.03% to 101.92, edging away from last week’s eight-month low of 101.50.

However, it remained on track for a fourth straight monthly loss of 1.5%, pressured downward by expectations that the Fed was nearing the end of its rate-hike cycle and that interest rates would not have to rise as high as previously feared.

Sterling was up 0.01% at $1.24005, while the kiwi edged 0.09% higher to $0.6500.

Moves were subdued ahead of policy meetings from the Fed, the European Central Bank (ECB) and the Bank of England (BoE) later this week.

“We will range trade a little bit as the market tries to assess how the central banks behave …. I think, for all three it’s going to be more about what they say than what they do,” said Rodrigo Catril, a currency strategist at National Australia Bank (NAB).

The Fed is widely expected to deliver a 25 basis point rate hike, while the ECB and the BoE are likely to raise rates by 50bp each.

The euro was last 0.03% higher at $1.08705 and was on track for a monthly gain of nearly 1.5%, marking its fourth straight month of increases.

The single currency has got support from continued hawkish rhetoric by ECB policymakers and ebbing fears of a deep recession in the euro zone.

Elsewhere, the Aussie rose 0.11% to $0.71175, while the Japanese yen slipped marginally to 129.94 per dollar.

Core consumer prices in Japan’s capital for the month of January marked the fastest annual gain in nearly 42 years, data on Friday showed, keeping the Bank of Japan under pressure to phase out its economic stimulus.

With China returning from its Lunar New Year holiday, focus will be on the upcoming release of its purchasing managers’ index (PMI) data on Tuesday.

“The market will be looking … hopefully not to get disappointed,” said NAB’s Catril.

“So far, the data coming from China, or the vibes coming from China, do play to the view that a good reopening in terms of activity is likely to unfold.”

Lunar New Year holiday trips inside China surged 74% from last year after authorities scrapped COVID-19 travel curbs, state media reported on Saturday.

The offshore yuan was last more than 0.1% higher, at 6.7465 per dollar.

Meanwhile, the ringgit continued to tick higher for the seventh straight session ahead of the US Federal Reserve’s (Fed) meeting on Jan 31 – Feb 1.

At 9 am, the ringgit rose to 4.2345/2395 against the greenback from Friday’s close of 4.2410/2475.

SPI Asset Management managing partner Stephen Innes told Bernama that the market is expecting a downshift in US interest rate hikes, from a 50 to 25 basis points hike in the Fed funds rates at this week’s Federal Open Market Committee (FOMC) meeting, which should support the ringgit later in the week.

MIDF Research noted that the US dollar continued to weaken against major currencies last week, with the US Dollar Index falling 0.1 per cent week-on-week to 101.93, the lowest weekly closing in eight months.

It said the ringgit appreciated although the price of oil dropped, strengthening by 1.0 per cent week-on-week. “Although crude oil ended 1.1 per cent lower at US$86.66 per barrel, the ringgit and regional currencies appreciated further last week backed by positive growth fundamentals and risk-on demand,’’ the research house said in a note.

The ringgit traded mostly higher against a basket of major currencies, except vis-a-vis the British pound, where it slipped to 5.2495/2557 from 5.2453/2533 at Friday’s close

The local note gained against the Singapore dollar at 3.2270/2311 from Friday’s close of 3.2280/2332, improved against the euro to 4.6046/6100 from 4.6159/6230 and appreciated against the Japanese yen to 3.2551/2594 from3.2658/2711 previously.

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