© Reuters
Por Geoffrey Smith
Investing.com – The dollar rose modestly at the start of trading in Europe on Monday, with interest in risky assets still capped on fears of rising interest rates and the war in Europe. East.
By 9:00 AM ET, the {{Dollar Index}}, which tracks the dollar against a basket of six other majors, is up 0.1% to 95.773, still within its range. recent and struggling to reach new highs.
The dollar is holding steady against the euro at the $1.1321 level, while the British pound is barely changed at $1.3551.
Marc Chandler, managing director of Bannockburn Global Forex, has pointed out that the dollar’s rally earlier in the month was clearly false, leaving the yen as the year-to-date winner among G10 currencies, up 1.2%.
However, the usual correlations between risk assets have dissolved, adds Chandler. The second-best performing currency so far this year, he notes, is the highly risk-sensitive Canadian dollar.
The paradox is no clearer than with the Russian ruble, which hit a new nine-month low against the dollar at the start of today’s trading day in Europe, amid concerns that last week’s diplomatic advances may not be enough. to stop a second Russian invasion of Ukraine in eight years.
The State Department has instructed the families of US diplomats in Ukraine to leave the country, suggesting the United States continues to believe there is a high probability of conflict. The United Kingdom has followed suit this Monday.
The ruble falls to 77.479 per dollar, despite the continued strengthening of the price of the , which usually determines its course.
However, events in Eastern Europe are likely to take a backseat to events in Washington DC later in the week. The Federal Reserve’s monetary policy committee begins a two-day meeting on Tuesday and is sure to lead to a turnaround in the dollar.
At the moment, short-term interest rate futures suggest the possibility of the Fed raising the fed funds target range by more than 25 basis points by the end of the quarter, implying a small risk of a hike. rate this week or a 50 basis point hike in March. However, an overwhelming majority is still betting on a first 25 basis point hike in March, which means that the most important thing about the Fed meeting will be its forecasts, especially when it comes to when – and how quickly – it will start. to sell his accumulated bond portfolio back on the market.
The yield on US Treasuries has risen during the first three weeks of the year, in part due to expectations of higher net supply driven by Fed bond sales during the year. But after hitting highs of over 1.80% last week, the 10-year Treasury yield has slipped back to 1.76%.
In Europe, the focus this Monday will be on the preliminary readings of the Purchasing Managers’ Indices for January. The monthly report from the Deutsche Bundesbank will also be important, given Germans’ concern over 30 years of inflation in the country and the European Central Bank’s unwillingness to react by tightening monetary policy.