U.S. Dollar Fell After Registering its Biggest Weekly Rise

The U.S. currency dropped broadly on Monday. This was after registering its biggest weekly rise in more than two months last week. This was due to doubts about the course of U.S. monetary policy triggered profit-taking. Riskier currencies, including the Australian dollar, the Norwegian crown, as well as the Canadian dollar were among the beneficiaries of a weaker greenback in quiet London trading, rising more than 0.5% each.

Nonetheless, Dallas Federal Reserve President Robert Kaplan undermined those expectations last week. Kaplan stated that he might reconsider the need for an early start to tapering if the virus harms the economy. He may change his opinion about asset purchase if the Delta Covid variant continues to take its toll on the country. Thus, dovish Fed comments are pushing the greenback down as the rising Delta Covid variant is negative for the dollar.

The Delta variant’s further spread might derail the central bank’s to taper its pandemic-era stimulus plan by the end of 2021. Fed Chair Jerome Powell will discuss the economic outlook at Federal Reserve’s Jackson Hole August 26-28 conference. His speech will be carefully parsed by traders eager for clues about the timing and pace of policy tightening. 

The dollar index climbed to a nine-month high last week, rising nearly 5% from May lows. The index jumped as investors firmed bets the Federal Reserve will start scaling back stimulus policies ahead of Europe and Japan. 

It dropped 0.2% to 93.29. Nonetheless, it was close to 93.734 on Friday, which was its best result since early November. Interestingly, Monday’s decline was slightly at odds with the trend in fixed income markets. The U.S. 10-year inflation-adjusted Treasury yields rose more than 1% for the first time in nearly a month. 

Euro and Dollar on Monday

The single currency jumped to a three-day high after data showed euro zone business grew strongly this month. Nevertheless, the pace of expansion slowed as fears of new coronavirus strains may bring renewed restrictions continued to weigh on sentiment.

The Australian dollar was among the main gainers after Prime Minister Scott Morrison’s comment. The country’s leader stated that Australians must start to learn to live with Covid-19 when higher vaccination rates are reached. 

The New Zealand dollar added 0.2% to $0.6854, still near Friday’s 9 ½ month low of $0.6807, with the nation under lockdown to contain a Delta outbreak. 

In cryptocurrencies, Bitcoin surpassed $50,000 for the first time since mid-May and last traded 2.06% higher at $50,333.24. 

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