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U.S. Dollar Lower As Treasury Yields Fall


The U.S. dollar weakened against its major counterparts in the Asian session on Thursday, as U.S. treasury yields dropped amid signals that inflation may have peaked and investors awaited the European Central Bank’s monetary policy decision later today for rate hike outlook.

Federal Reserve board member Christopher Waller said on Wednesday that the central bank will continue with its plan for rate hikes to curb inflation even though the pace of price increases is likely to have peaked.

The economy is strong enough to support higher rates, enabling the Fed to move prices down without causing a recession, Waller added.

Investors await a slew of data including retail sales, initial jobless claims, and the University of Michigan’s consumer sentiment index due later today for more direction.

With euro area inflation touching an all-time high of 7.5 percent last month, the ECB could end the asset purchase program early in the third quarter and open the door for a first rate hike later this year.

Risk sentiment improved after China’s cabinet signaled upcoming cuts to banks’ reserve requirement ratios and interest rates to counter the impact of Covid-19 and boost the recovery and growth of consumption.

The greenback edged down to 0.9324 against the franc, from a high of 0.9353 it touched at 9 pm ET. Against the kiwi, it reached as low as 0.6834. The currency is likely to locate support around 0.90 against the franc and 0.70 against the kiwi.

The greenback slipped to a 2-day low of 125.10 against the yen and a 9-day low of 1.3147 against the pound, following its prior highs of 125.70 and 1.3100, respectively. The greenback is seen finding support around 119.00 against the yen and 1.33 against the pound.

The greenback touched a 3-day low of 1.0923 against the euro and a 1-week low of 1.2541 versus the loonie, off its previous highs of 1.0883 and 1.2569, respectively. The next possible support for the greenback is seen around 1.12 against the euro and 1.23 versus the loonie.

The greenback, however, climbed to 0.7442 versus the aussie, after dropping to 0.7468 earlier in the session. If the dollar rises further, 0.72 is likely seen as its next resistance level.

Looking ahead, the European Central Bank will announce interest rate decision at 7:45 am ET. The ECB is expected to hold its main refi rate at a record low zero percent and the deposit rate at -0.50 percent.

U.S. weekly jobless claims for the week ended April 9, business inventories data for February, University of Michigan’s preliminary U.S. consumer sentiment index for April, retail sales and export and import prices for March are due out in the New York session.

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