| 29 May 2024, Wednesday |

Dollar enjoys improving economic outlook, doubts surround euro

On Friday, the dollar rose to multi-month highs against most major currencies, buoyed by rising Treasury yields and a wave of optimism about improving US economic data and the rollout of coronavirus vaccines.

The euro rose marginally ahead of data on German market sentiment due later in the day, but the euro’s prospects have dimmed due to renewed coronavirus lockdowns and a weak vaccination rate across the European Union.

While the dollar has more space to grow against the euro, its gains against other currencies have been so rapid in recent weeks that some analysts are cautioning against chasing the dollar higher from current levels.

“The euro has broken through the 200-day moving average, and that is a clear sign that it will continue to go lower,” said Minori Uchida, head of global markets research at MUFG Bank in Tokyo.

“The yen is getting strong on some of the crosses, which will cap dollar/yen. Yields have supported the dollar, but this move could start to run out of steam.”

The dollar dropped to $1.1778 against the euro, but it was still near its highest level since November last year.

The dollar rose to 109.25 yen, which is near its highest since June.

The greenback traded at 0.9399 Swiss franc, holding onto a 0.5% gain from the previous session.

One notable exception to the dollar’s gains was the British pound, which edged up to $1.3762 after rising 0.4% on Thursday. Data due on Friday that is forecast to show a rebound in British retail sales could give the pound a further boost.

Last week, jobless claims in the United States dropped to a one-year low, and President Joe Biden announced that he would double his vaccine rollout plan after exceeding his previous target of 100 million shots 42 days ahead of schedule, bolstering dollar optimism.

The dollar index against a basket of six major currencies stood at 92.769, close to a four-month high. For the week, the dollar index was on course for a 0.9% gain.

Traders will look to data on U.S. personal consumption due later on Friday for further hints about the strength of the U.S. economy.

The Ifo survey in Germany is expected to show an increase in company confidence during European trading. However, traders believe that this would not be enough to stop the euro’s decline because concerns about the European Union’s slow vaccination rollout and squabbles with former member Britain over vaccine exports have become a dominant theme.

The Australian and New Zealand dollars rebounded from sharp losses earlier in the week.

The two currencies are likely to remain supported because of their relative success in limiting the economic fallout caused by the coronavirus pandemic, analysts said.


  • Reuters