The week started on a rough note for the dollar as the safe haven dropped again on Tuesday. The currency has been on a falling spree ever since the Fed hinted at increasing the interest rates in March.
On the other hand, the news spelled good news for risk-sensitive currencies like the pound. Similarly, the Australian dollar also regained its overnight losses during the period. The week still has several important meetings due, so FX online brokers are on their toes.
January posed issues to most equities as they fell over 5% in value. That’s why February’s firm start is showing some hope for the currency markets. Unlike most currencies, the period comes with troubles for the US dollar as it fell from its 19-month high. The dollar index dropped on Monday and Tuesday to reach 96.395.
The dollar also dropped against the yen, with the pair standing at 114.990. Similar to the Federal Reserve, the Reserve Bank of Australia also made a huge announcement. The RBA recently discarded any expectation for near-time rate surges until the inflation hikes. The news disrupted AUD’s movement as it sharply fell overnight.
However, the risk-on tone in the market saw the currency recovering soon after. During early European trading, it even surged 0.3%, reaching 0.70895 dollars. You-Na Park-Heger, EM and FX analyst at Commerzbank, talked about the recent pattern change.
According to Park, the participants amassing a surge at Q2’s start must be disappointed. However, they should understand that a first-rate step can only be fully priced in for the middle of the year. This seems possible according to the RBA’s sentiments.
Besides that, investors are also banking on European Central Bank rates to surge in 2022. With such a hectic environment, it is natural for traders to vary their investments.