The U.S. dollar fell in early European trading on Monday. Investors were more willing to take risks because they thought that easing restrictions in China could help growth around the world.
At 2:55 AM ET (06:55 GMT), the Dollar Index, which compares the U.S. dollar to a basket of six other currencies, was down 0.5% to 102.660. This was a drop from the middle of May, when it reached its highest level in 20 years.
The safe-haven dollar seems to be losing steam because people are becoming more willing to take risks. This is helped by the news that Shanghai, China’s commercial hub, will end its city-wide lockdown on June 1 and return to a more normal life.
Also, Beijing approved an unexpectedly large rate cut last week, which is seen as a sign that the Chinese government will help the second-largest economy in the world.
In a note, analysts at ING said, “DXY [the dollar index] could correct a little lower to 102.30, but we don’t think this is a sign of a top-building bull market.” “The dollar won’t build a top until the Fed puts a damper on tightening expectations.”
USD/CNY fell 0.5 percent to 6.6592. The pair kept falling after the yuan had its best week since late 2020.
The risk-sensitive Australian and New Zealand dollars went up to their highest levels in a few weeks, with the AUD/USD going up 1.1% to 0.7111 and the NZD/USD going up 1.2% to 0.6467.
Australia chose a new government on Saturday, but it’s not likely that this will change how the Reserve Bank of Australia thinks about monetary policy. On Wednesday, most people expect the Reserve Bank of New Zealand to raise its key cash rate by 50 basis points.
EUR/USD went up by 0.5% to 1.0608 before the important German Ifo business climate index for May came out.
GBP/USD went up 0.7% to 1.2573 as the important U.K. housing market continued to do well. According to data from the real estate company Rightmove, asking prices for U.K. homes set a new record for the fourth month in a row in May. They went up by 2.1%, which is the most since 2014.
On Wednesday, the minutes from the last meeting of the Federal Reserve will be made public. Traders will look at these minutes for clues about whether or not the U.S. central bank can stop the most aggressive inflation in four decades without sending the economy into a recession.
Since March, the Fed has already raised interest rates by 75 basis points, and the markets think that rates will go up by another 50 basis points in June and July.
