Dollar Rebounds On Warsh-led Gains

(RTTNews) - The U.S. Dollar rebounded during the week ended February 6, buoyed by the boost provided by the appointment of Kevin Warsh as the next Fed Chairman. The Dollar rallied as markets priced in the likelihood of long-term monetary policy under the new Fed Chair not being as dovish as markets were initially anticipating.

The greenback inter alia rallied against the euro, the British pound, the Japanese yen, the Swedish krona, the Canadian dollar as well as the Swiss franc but declined against the Australian Dollar. The Dollar Index which measures the Dollar's strength against a basket of 6 specified currencies rallied more than half a percent during the past week.

The week witnessed extreme turbulence across asset classes and regions as markets evaluated the likelihood of a hawkish monetary policy under the new Fed Chair Kevin Warsh. While the dollar gained, precious metals, equities, commodities and cryptocurrencies witnessed whipsawing prices.

A larger-than-expected reading of ISM manufacturing PMI in January also boosted the greenback. The ISM Services PMI released on Wednesday also pointed to another robust expansion in the services sector.

However, data released by the U.S. Bureau of Labor Statistics on Thursday showed job openings in the U.S. falling to 6.542 million in December. The lowest reading since September 2020 was well below market expectations of 7.2 million.

Amidst the data releases and the market turbulence, the six-currency Dollar Index gained 0.66 percent during the week ended February 6. The index closed at 97.63, versus 96.99 a week earlier. Though the Index had dropped to a low of 97.01 on Monday, it climbed to a high of 97.99 on Thursday.

Amidst the dollar's rebound, the EUR/USD pair ended the week on a negative note, closing 0.28 percent lower at 1.1817 versus 1.1850 a week earlier. During the week ended February 6, the pair ranged between the high of 1.1875 recorded on Monday and the low of 1.1765 touched on Friday. The European Central Bank had on Thursday left interest rates unchanged but reiterated expectations that inflation could stabilize at its 2 percent target over the medium term.

The GBP/USD pair also slipped 0.56 percent during the week ended February 6 amidst the Bank of England keeping its interest rates steady. The narrow 5 to 4 vote showed policymakers balancing easing inflation pressures against risks from a weakening economy. The sterling declined to $1.3613, from $1.3689 a week earlier, after touching a high of $1.3735 on Wednesday and a low of $1.3508 on Friday.

Boosted by the Reserve Bank of Australia's hawkish tone and a quarter percent rate hike to combat the resurgence of inflation, the Australian Dollar rallied against the U.S. Dollar during the week ended February 6. The pair ranged between the high of 0.7051 recorded on Tuesday and the low of 0.6897 recorded on Friday and eventually closed at 0.7017. The pair was at 0.6962 a week earlier, implying weekly gains of 0.79 percent.

During the week ended February 6, the Japanese yen plunged in the wake of comments from Prime Minister Sanae Takaichi about the benefits of a softer currency. The pair rose 1.6 percent to 157.21 rising from 154.77 a week earlier. Trading during the week ahead of elections in Japan ranged between the low of 154.55 recorded on Monday and the high of 157.35 recorded on Thursday.

Ahead of key economic data releases due during the week including retail sales on Tuesday, payrolls on Wednesday and inflation readings on Friday, the dollar has slipped more than half a percent. The 6-currency index is currently at 97.08 versus 97.63 at close on Friday. The EUR/USD pair has jumped 0.72 percent to 1.1902 from 1.1817 on Friday. The GBP/USD pair is currently at 1.3652 versus 1.3613 at the end of the previous week. The AUD/USD pair has gained 0.58 percent to 0.7058 from 0.7017 on Friday.

Amidst the yen's strength attributed to fears of government intervention in the currency market, the USD/JPY pair has decreased 0.80 percent to 155.95. The pair had closed at 157.21 on Friday.