May 02, 2022 03:45AM ET
By: AnalysisWatch
The dollar held near a 20-year high Monday, while the euro struggled around the $1.05 level. Investors prepared for a busy week of central bank meetings, including a likely Federal Reserve rate hike.
Markets in Asia and London were closed for the holidays, so trading was quiet.
Investors expect the Fed to raise rates by 50 basis points at its meeting, and the uncertainty is how aggressively Fed Chairman Jerome Powell will speak out after the decision.
Markets are expecting an aggressive series of rate hikes by the Fed in an attempt to curb rapidly rising inflation.
This, coupled with expectations of a much slower pace of monetary tightening by the European Central Bank and concerns about the impact of the war in Ukraine on the eurozone economy, has prompted investors to flee to the dollar, pushing the euro to levels last seen in 2017.
The dollar index gained 5% in April, its best monthly performance since January 2015.
They lowered their euro/dollar forecasts to $1.05 for June, $1.06 for September, $1.08 for December, and $1.10 for March 2023, from $1.11 previously.
The dollar index was last at 103.19, slightly lower than the previous day. The euro traded up 0.1% at $1.0555.
Incidentally, the dollar gained half a percent against the Chinese yuan in offshore markets, reaching 6.6895, just below its highest level since late 2020.
The Australian and New Zealand dollars initially fell sharply in Asian trade as the sell-off on Wall Street undermined risk appetite and overshadowed the prospect of higher interest rates at home.
The Australian dollar lost 5.7% last month as fears of a recession in Europe and lockdowns in China undermined risk assets.
The Kiwi dollar traded at $0.6422, its lowest since mid-2020, after losing 6.9% in April.