Title: Dollar declines for second day running as FX markets change course

Feb 01, 2022 07:55AM ET

By: AnalysisWatch

The dollar fell for a second consecutive session on Tuesday, giving up its 19-week high reached at the end of January, while risk-sensitive currencies such as the Australian dollar and the British pound gained.

In the wake of falling almost 5% in January, worldwide financial exchanges began February somewhat firmer, and cash markets have additionally shifted direction.

In the wake of hitting a 19-month high last week, the US dollar list fell on Monday. At 1223 GMT on Tuesday, it was at 96.281, down 0.4% from the earlier day.

The euro-dollar gained 0.3% to trade at $1.12705.

The dollar's downward movement could be attributed to month-end trade flows that prompted investors to sell dollars last week.

Increased risk appetite in the equity markets could also play a role, as the dollar is seen as a safe-haven currency.

However, according to Neil Jones, head of foreign exchange trading at Mizuho, investors and analysts also believe that the euro may be more attractive than previously thought, given interest rate hikes in major economies.

According to Eikon's definitive data, the market currently expects the US Federal Reserve to raise interest rates up to five times this year, with the first hike expected in March.

Meanwhile, the European Central Bank is sticking to its ultra-loose monetary policy and has scaled back market expectations for an ECB rate hike this year.

The dollar also weakened against the Japanese yen, trading at 114.635, while it hit a six-day low against the Swiss franc.

The Australian dollar weakened sharply overnight after the Reserve Bank of Australia (RBA) put expectations for short-term rate hikes on hold until inflation is higher.

The British pound rose 0.3% to $1.3488.