Dollar Continues to Slip, Extends Drop Against Peers

2 min read
13 Apr, 21
Written by Clover4X

 

 

Article Highlights:
  • US dollar continues to lose ground against other currencies
  • Inflation data as the major economic focus later today

Dollar Continues to Slip

The dollar has declined this month across the board as the Federal Reserve vowed to leave interest rates unchanged while it remains committed to providing monetary support to the economy. Fed’s message comes despite the expected swift recovery of the US economy.

So far in April, the US dollar has depreciated by 1.2% against a basket of currencies. The EUR/USD is now trading 2% higher as the exchange rate hovers near the monthly highs around 1.19-1.20. The greenback has lost even more against the Swiss Franc as the USD/CHF is down 2.7%, currently trading at 0.9230. In the early days of April, the USD/CHF rate was floating at a 10-month high near 0.95. On Monday, the pair marked its seventh straight day of losses.

The dollar’s weakness comes amid an increasingly positive outlook for the US economy. Across the states, a successful vaccination campaign promises to open up the economy and allow businesses and communities to return to their activities. The fall in the dollar also happened against the backdrop of strong economic data.

Investors Keep a Watchful Eye for Key Data

The inflation outlook could be partly responsible for the recent pressures on the US dollar. Traders and investors grapple with the prospects of higher prices as a result of the large-scale government spending this year. The same inflation fears have led to a sharp rise in US Treasury yields.

Inflation jitters are likely to narrate the dollar’s momentum as investors remain concerned not so much if inflation will be higher than now but how long will inflation stay high. According to the Federal Reserve, inflation is likely to happen but it will be short-lived. This year the Fed foresees inflation to rise to 2.4% but fall back to Fed’s target of 2% next year.

On the topic of inflation and its impact on the US dollar, US consumer price data for March due later today will be closely monitored by investors. The figures will show if price pressures are increasing prompted by fiscal and monetary stimulus or if inflation remains under control.

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