US dollar dips as inflation concerns ease
The US dollar headed south overnight, unable to hold onto recent gains as inflation fears temporarily subsided as the bond passed without incident, and a fall in US turned attention back to recovery. The fell 0.44% to 91.45, although dollar short-covering has lifted it back to 91.55 in Asia.
negotiated the ECB with aplomb, rising 0.45% to 1.980 overnight, and is seemingly out of the woods for now. A similar story has played out with and . The under-pressure Australian and New Zealand dollars also rallied overnight; both are testing their respective downside breakouts at 0.7805 and 0.7230 today. A close tonight above these levels by and will conclude their downward corrections for now.
Asian currencies rallied strongly overnight in the general risk-on environment, as the Wall Street price action alleviated the pressure on their dirty pegs to the greenback. Today some profit-taking is evident in Asia, with the , , and all falling. Still, net-net, regional currencies, including the yuan, have booked impressive gains over the last 24 hours.
The US dollar short-squeeze looks to have run its course in the short-term, with the FOMC dot plots next Wednesday in New Year the next hurdle currency markets have to negotiate. A revision of interest rate increase expectations forward will likely see dollar strength return.
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