Positive Data Supports US Dollar While Risk Appetite Dents Its Appeal
The US dollar holds on to its gains from the previous session even as moves in the forex market remain somewhat limited as investors wait to hear from key central banks over the coming week. At the time of writing, the US dollar index DXY is trading at around 93.87.
The wait and watch approach is keeping safe haven Japanese yen under pressure, sending it close to the lowest levels seen in four years against the greenback. The currency has been weighed down by expectations for the BOJ to maintain its ultra-loose monetary policy even as several of its peers are likely to start tightening their monetary policies amid inflationary pressures.
Meanwhile, the common currency is also exhibiting signs of some weakness after losing 0.4% of its value against the US dollar so far this week. The cautious mood towards the Euro comes ahead of the ECB meeting scheduled for Thursday with markets expecting it to continue with its dovish stance.
The US dollar received some support from strong economic data releases in the previous session. US consumer confidence picked up to 113.8 in October, surprising investors who anticipated some downward pressure from rising inflation. In addition, new home sales also posted an uptick by 14% YoY in September, further raising the prospects for the US economy and boosting investor confidence towards its currency.
Gains in the US dollar, meanwhile, remain limited on account of a positive risk sentiment in global financial markets. The earnings report releases through Wall Street have helped US equities rally to record highs this week, sending investors away from the safety of the reserve currency.
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