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Dollar falls as risk appetite improves, sterling steady before BoE

  • Dollars slips off two-week high.
  • Aussie dollar falls overnight.
  • Sterling steady before BoE meeting.
Published May 6, 2021

LONDON: The dollar fell from a two-week high on Thursday as global market risk appetite improved, while traders focused on a Bank of England meeting and economic data that may provide clues on when the US Federal Reserve might dial back monetary stimulus.

The dollar has rebounded from a one-month low over the past week, swung by US economic data that has largely supported the case for a rapid recovery from the pandemic.

But it slipped on Thursday and by 1019 GMT was down 0.3% on the day at 91.03 against a basket of currencies.

Neil Jones, head of FX sales at Mizuho, said that the move was likely due to a series of speakers and statements reinforcing "the lower-for-longer mentality with regards to interest rates."

On Wednesday, Federal Reserve speakers downplayed the risks of higher inflation.

The fact that Britain and Japan had holidays this week may also be contributing to the dollar's move, as investors may have waited until these markets reopened before selling the currency urency, Jones said.

Immediate market attention was focused on the Bank of England meeting at 1100 GMT.

The Bank is expected to say that Britain's economy is heading for a much stronger recovery this year than it previously expected, and it might start to slow its pandemic emergency support.

"Global investors looking at the UK are noticing that lockdown is easing, economies starting to open again so there are some expectations that may filter through to the Bank of England and perhaps have some impact on the Monetary Policy Committee's sentiment so, either way, if it's hawkish or dovish sentiment I think (the pound) will move," said Mizuho's Jones.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

At 1024 GMT, the pound was steady against the weaker dollar, at $1.3916.

The euro was up 0.4% versus the dollar at $1.2049, and up 0.3% against the pound, at 86.57 pence per euro .

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

It was up 0.1% versus the US dollar at 0.77515 at 1028 GMT, having hit as low as 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1% on the day.

"The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event," wrote ING strategists in a note to clients.

Strong domestic demand for consumer goods propelled a bigger than expected jump in German industrial orders in March, suggesting that manufacturers in Europe's largest economy will support a recovery in the second quarter.

The Canadian dollar hit a three-year high, helped by oil price gains and the Bank of Canada's recent shift to more hawkish guidance.

The Norwegian crown was little moved by Norges Bank saying it remained on track to hike interest rates later this year.

In cryptocurrencies, ether traded around $3,500 after reaching a record high of $3,559.97 on Tuesday, skyrocketing nearly 800% this month.

Bitcoin was up around 1.5% at $58,350, still below the all-time high of $64,895.22 it reached in April.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.


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