The U.S. dollar held steady close to a two-week high as trading began in Asia on Tuesday, with market anxieties regarding U.S. military actions in Venezuela subsiding and dovish remarks from Fed officials encouraging risk-taking on Wall Street. The dollar index, which measures its strength against a basket of six currencies, was last trading at 98.36, nudging up 0.04% after snapping a four-day winning streak on Monday. “The market isn’t really concerned about what’s happening in the geopolitical front, at least in the near term,” stated Rodrigo Catril. That environment “lessens the appeal for safe havens and we’ve seen the U.S. dollar on the backfoot,” he added.
The financial markets experienced significant volatility following the dramatic ousting of Venezuelan President Nicolas Maduro over the weekend, leading to fluctuations in commodity markets. On Monday, Maduro entered a not guilty plea regarding narcotics charges in a federal court located in Manhattan. The Australian dollar, known for its sensitivity to commodity prices, was last observed down 0.1% at $0.6713, retreating from the upper boundary of the trading channel it has occupied for the past two weeks following a peak in copper prices. The New Zealand dollar was recently down 0.1% at $0.5784. In relation to the yen, the dollar was last observed increasing by 0.2% to reach 156.72 yen.
The dollar faced downward pressure on Monday following dovish remarks from Minneapolis Federal Reserve President Neel Kashkari, a member of the rate-setting committee this year. In an interview, he expressed concern that the jobless rate might ‘pop’ higher. Following his remarks, expectations for policy easing have increased slightly. However, Fed funds futures continue to indicate an implied 82.8% probability that interest rates will remain unchanged at the U.S. central bank’s upcoming meeting on January 27-28, down from an 83.4% chance observed on Friday, as per the report.
The greenback experienced additional pressure as U.S. manufacturing activity contracted more than anticipated in December, reaching a 14-month low. The slight decrease in the ISM Manufacturing Index for December indicates that the sector faced challenges in gaining momentum as the year ended. However, we believe this will not hinder overall GDP from growing at a robust rate in the upcoming quarters,” economics stated in a research report. In relation to the Chinese yuan trading offshore in Hong Kong, the dollar remained unchanged at 6.983 yuan. The euro declined by 0.1%, now standing at $1.1713, whereas the British pound also saw a decrease of 0.1%, trading at $1.3533.