Dollar at Near 5-Month Low
The dollar index retreated further to below 90 on Tuesday, the lowest on a closing basis since January 7th, amid renewed bets the Federal Reserve will not tight monetary policy anytime soon. Recent comments from several Fed officials helped to calm investors’ worries over a jump in inflation and the need to pull back support. Dallas Federal Reserve President Robert Kaplan said he does not expect interest rates to rise until next year and Federal Reserve Vice Chair Richard Clarida said the weaker-than-expected U.S. jobs report showed the economy had not yet reached the threshold to warrant scaling back the central bank’s massive bond purchases. In the absence of fresh catalysts, investors await minutes of the US Federal Reserve’s April meeting, due on Wednesday, for clues regarding the central bank’s tolerance for near- and medium-term inflation.
South African Rand Strengthens to 1-Week High
The South African rand firmed to 14 against the greenback on Tuesday, its highest on a closing basis since May 11th, helped by easing inflation fears as US Treasury yields stalled after a Fed policymaker on Monday reiterated again the central bank’s current ultra-accommodative policy stance will be maintained for a long period. Meanwhile, the rand’s gains were capped by caution ahead of domestic inflation figures and the South African Reserve Bank’s monetary policy meeting later in the week. Also, concerns over a third wave of Covid-19 in the country persist. Meanwhile, the state utility Eskom has suspended power cuts until 5 pm on Tuesday afternoon, but there is no guarantee that load shedding will not continue beyond Tuesday.
Australian Dollar Lifts 0.6%
The Australian Dollar gained 0.00448 points or 0.58% to 0.78057 against the US Dollar on Tuesday as minutes of the RBA’s May 4 policy meeting showed that policymakers continue to see only muted inflation risks in the years ahead, likely putting off the need for a rise in interest rates until 2024. In the US, Federal Reserve’s Richard Clarida also noted that the US economy could grow 6% to 7% this year, the fastest growth in 35 years. Local 10-year rates lifted near 2-month highs of 1.735%, while US 10-year rates were at 1.647%. Meantime, surging commodity prices provided a bid to the Aussie. Investors now await the US Federal Reserve’s April meeting due on Wednesday for clues regarding the central bank’s tolerance for near and medium-term inflation.
Netherlands Enters Double-dip Recession in Q1
The Netherlands’ economy shrank by 0.5 percent on quarter in the three months to March 2021, compared with market expectations of a 0.6 percent fall, a preliminary estimate showed. The latest reading followed a 0.1 contraction in the previous three-month period, meaning that the country entered a double-dip recession in the first quarter. Household consumption fell 3.5 percent (vs -1.4 percent in Q4) and public spending decline 1.5 percent (vs -0.4 percent in Q4). On the other hand, fixed investment grew by 3.7 percent (vs 1.7 percent in Q4) and net trade contributed positively to the GDP as exports rose more than imports. Year-on-year, the economy shrank by 2.8 percent, the same pace as in the previous period and compared with market forecasts of a 2.1 percent contraction.