The US Dollar Index, which had been on the rise over the previous four trading days, fell towards 102.00 on Tuesday as investors awaited the highly anticipated March Consumer Price Index (CPI) data from the US. The lack of demand for the USD has led to a weakening of the currency against its major rivals.
Positive jobs report lifts USD ahead of weekend
The USD had gained strength ahead of the weekend as investors began to factor in a 25 basis points (bps) rate hike by the US Federal Reserve (Fed) in May. This was largely on the back of the upbeat March jobs report, which indicated a rise in employment numbers.
Lower US Treasury bond yields put pressure on USD
However, trading conditions began to normalize after the long weekend, and US Treasury bond yields started to push lower, making it more difficult for the USD to continue to outperform its peers. This, coupled with an improving risk mood in the markets, has added additional weight on the USD’s shoulders.
Implications for the markets
The USD’s weakening against its major rivals could have implications for the markets, particularly for investors who hold US assets or trade with the USD. A weaker USD can lead to a rise in inflation, as imports become more expensive. It can also lead to a decline in foreign investment in the US, as investors seek higher returns in other currencies.
In conclusion, the USD’s decline against its major rivals is likely to be closely watched by investors in the coming days, particularly as the CPI data is released. This could provide further insight into the state of the US economy and potentially impact the Fed’s decision-making process regarding interest rates.
