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FOREX-Dollar stumbles as markets reassess rate bets, eye ECB

    (Updates prices; adds comment, FX table, bullets, byline,
WASHINGTON dateline)
    * U.S. rate hike bets pare back aggressive Fed tightening
    * Investors look to ECB annual forum in Sintra
    * U.S. dollar eyes recovery after posting first weekly
this month

    By Saikat Chatterjee and Hannah Lang
    LONDON and WASHINGTON, June 27 (Reuters) - The U.S. dollar
struggled versus its major rivals on Monday as softening
inflation expectations prompted a reassessment of the prospects
for aggressive interest rate hikes but volatile markets
cushioned a broader decline.
    Aggressive rate hike bets have boosted the dollar with an
index rising to a near two-decade high of 105.79 earlier this
month. But with some high-frequency data indicators showing
economic momentum starting to cool and a broader drop in
commodity prices, investors are becoming cautious.
    "Today is a consolidation day," said Marc Chandler, chief
market strategist at Bannockburn Global Forex LLC.
     "I think that we're just waiting for more data, and that
data comes out later this week," he added, pointing to a readout
expected on Friday detailing consumer prices in the euro zone.
    Against its rivals, the dollar edged 0.12% lower to
103.89. Earlier this month, it hit 105.79, its highest since
late 2002.
    "The dollar index is trading towards the lower end of its
recent trading range suggesting some vulnerability to further
weakness," said Shaun Osborne, an analyst at Scotiabank, said.
    "We feel the broader dollar rally will struggle to extend
significantly but losses are liable to remain limited unless or
until a more significant bearish catalyst emerges."
    While slowing growth concerns have weighed on sentiment,
lower inflation expectations, chiefly through falling commodity
prices, have also eased the pressure for higher rates.
    For example, copper is on track for its largest monthly
decline since the pandemic-fuelled selloff in March 2020. Oil
prices are set to see a monthly decline for the first time this
    Falling commodity prices have weighed on expectations of
where U.S. interest rates will peak next year. Higher terminal
pricing of benchmark interest rates has been a key support for
the dollar but that source of strength has faded in recent days.

    Futures pricing shows traders now anticipating the
U.S. Federal Reserve's benchmark funds rate stabilising around
3.5% from March next year, a pullback from pricing in rates
zooming to around 4% in 2023.
    "Broadly speaking, markets have priced a lower and earlier
terminal rate from the Fed as a result, which is shaving some of
the dollar's appeal from a yield differential basis," said Simon
Harvey, head of FX analysis at Monex Europe.
    The euro led gainers versus the dollar as the
European Central Bank's annual forum on central banking in
Sintra, Portugal got underway with ECB President Christine
Lagarde and U.S. Federal Reserve Chair Jerome Powell both
attending the meeting. Markets will watch for any signs of
future policy moves.
    The euro was up 0.27% at $1.0585.
    Commodity currencies came under pressure on Monday as data
showed profits at China's industrial firms shrank again, albeit
at a slower pace, in May after a sharp fall in April.

    Elsewhere, Russia's rouble weakened in the interbank
market as Russia headed for its first sovereign default since
the Bolshevik revolution a century ago.
    Cryptocurrencies stumbled, with the world's biggest
cryptocurrency Bitcoin down 1.67% trading at $20,818.54.
It fell to as low as $17,588.88 earlier this month.
    Currency bid prices at 9:55AM (1355 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change
 Dollar index                 103.8900       104.0300    -0.12%         8.600%        +104.2100   +103.7900
 Euro/Dollar                  $1.0585        $1.0558     +0.27%         -6.89%        +$1.0592    +$1.0550
 Dollar/Yen                   135.0550       135.2100    -0.10%         +17.33%       +135.5400   +134.5300
 Euro/Yen                     142.95         142.69      +0.18%         +9.69%        +143.3100   +142.0600
 Dollar/Swiss                 0.9578         0.9586      -0.07%         +5.01%        +0.9620     +0.9561
 Sterling/Dollar              $1.2286        $1.2273     +0.11%         -9.15%        +$1.2332    +$1.2239
 Dollar/Canadian              1.2908         1.2888      +0.16%         +2.09%        +1.2916     +1.2865
 Aussie/Dollar                $0.6934        $0.6941     -0.09%         -4.60%        +$0.6958    +$0.6906
 Euro/Swiss                   1.0138         1.0113      +0.25%         -2.23%        +1.0157     +1.0104
 Euro/Sterling                0.8614         0.8601      +0.15%         +2.55%        +0.8625     +0.8578
 NZ                           $0.6310        $0.6314     -0.03%         -7.78%        +$0.6326    +$0.6283
 Dollar/Norway                9.8080         9.8545      -0.40%         +11.42%       +9.8810     +9.8080
 Euro/Norway                  10.3848        10.3937     -0.09%         +3.71%        +10.4415    +10.3653
 Dollar/Sweden                10.0785        10.1325     -0.14%         +11.76%       +10.1422    +10.0555
 Euro/Sweden                  10.6691        10.6842     -0.14%         +4.25%        +10.7092    +10.6439

 (Reporting by Saikat Chatterjee in London and Hannah Lang in
Washington; Editing by Muralikumar Anantharaman, Jane Merriman
and Susan Fenton)

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