The US dollar rose to a multi-month high in overnight trade Monday amid negative geopolitical headlines. But ultimately the greenback paired gains and ended slightly lower as risk-on money flows returned with dip buyers at work in the equity market. The Dollar Index ended down 0.08%, notes Tom Essaye, president of the Sevens Report.
Looking across global currencies, moves were limited as traders continued to digest monetary policy outlooks, recent economic data, and ultimately central bank policy differentials, while geopolitical angst kept a fear bid under the dollar for most of the day.
US Dollar Index
Source: TradingView
The yen edged up 0.09%, a modest move that proved to be one of the larger fluctuations of the day in the foreign exchange space. Japanese GDP was revised up and the yen was close to the “currency intervention threshold” of 160 – where the government stepped in to defend the yen in recent weeks – scaring shorts out of the market.
In Europe, the euro rose 0.07% as traders fully priced in a rate hike from the ECB on Thursday. The pound was flat as traders digest mixed economic data with no BOE meeting to position into this week.
Looking elsewhere, the Aussie dollar edged up incrementally amid risk-on money flows and the Canadian loonie fell slightly despite firming oil prices. The sharp reversal in WTI and Brent from early session highs tamped down optimism for the nation’s largest export while currency traders digested news that the Canadian economy fell into a “technical recession” in Q1.
Bottom line: It was a quiet day in forex to start the week. But with several central bank decisions due later in the week, volatility in the space could pick up materially.
