Since Federal Reserve minutes were less dovish than some expected, the United States dollar jumped. There were calls to take profits after the euro surged. After Norway’s central bank leaves rates unchanged, the country’s crown weakened.
The less dovish than forecasted minutes from last month’s United States Federal Reserve policy meeting prompted bears to buy into the heavily shorted currency. Thus, on Thursday, the United States dollar consolidated gains, fueling its most significant one-day surge in more than two months.
The dollar index tracks the greenback’s value against a basket of currencies. It had climbed 1% above the two-year low, at 92.12 hits on Tuesda., Thus, in late morning London trading, it cemented its gains at 93.01.
The United States struggled to tame the coronavirus pandemic. The Federal Reserve thus unleashed an unprecedented policy stimulus. This has darkened the outlook for the greenback.
Investors are turning less bearish on the United States dollar. This is because of a resurgence of COVID-19 cases in Europe and short bets approaching historical extremes.
Analysts at Deutsche Bank said that the recent rise of the euro versus the United States dollar was probably running out of steam.
They told their clients that, with EUR/USD having reached its 1.20 target earlier this week, they now favor taking a profit. Moreover, they see a more balanced outlook as they approach September.
Also, HSBC foreign exchange strategists, in a similar move last week, said that they did not believe the dollar’s weakness will persist much further.
Speculation has been rife that the Federal Reserve will adopt an average inflation target. They seek to push inflation above 2$ to make up for years it has run below. Moreover, they look to cap government bond yields as part of a broader policy review.
United States dollar bears took the signal that the greenback selling may be overdone for now and resumed selling the aussie and euro.