Dollar edges lower, but is close to 6-week high

The dollar fell, however, it stayed close to Friday’s six-week high. Recent positive economic data made people think the Fed would be more likely to tighten monetary policy, which could help the dollar.

The U.S. dollar index measures the USD against six other currencies. It slipped 0.15% to 103.84 but was up nearly 1.82% on the month, notching its first monthly gain since last September. On Friday, the six-week high was 104.68.

Data from the world’s largest economy in recent weeks, pointing to a still-tight labor market, firm consumer prices, solid retail sales, and higher producer prices, have fueled expectations that the U.S. central bank will need to curb inflation. And that interest rates should be higher.

But now, analysts say the dollar will move back down to where it was before the Fed’s decision.

Dovish comments from Fed officials also supported the U.S. dollar as they signaled that interest rates must rise to tackle inflation successfully.

Similarly, two European Central Bank policymakers said that interest rates in the eurozone still have a way to go, adding to market prices for a peak ECB rate.

Other currencies

The euro changed a little at $1.0684, slightly above Friday’s six-week low of $1.06126.

The yen was unchanged at 134.17 against the dollar. It hit a two-month high of 135.13 on Friday.

The Australian dollar rose 0.42% to $0.6908 ahead of Tuesday’s RBA’s latest policy meeting.

On Wednesday, the kiwi fell 0.22% to $0.6232 ahead of the Bank of New Zealand’s rate decision. The RBNZ should ease its tightening campaign only slightly, raising interest rates by half a point to 4.76%.

In Asia, China kept interest rates the same for 6 months in February. This is good news for the world’s second-largest economy, which is recovering from a pandemic-induced slump.

The offshore yuan was slightly higher at $6.8644, while the onshore yuan was last bought at $6.8581.