Title: Dollar Index Edges Lower as Investors Gauge Fed Rate Path

Jun 27, 2022 02:38AM ET

By: AnalysisWatch

On Monday, the dollar fell back slightly from a 20-year high reached earlier this month as disappointing U.S. economic data could dampen expectations for aggressive interest rate hikes by the Federal Reserve.

At 02:38 AM EST, the U.S. dollar index, which measures the greenback against six rival currencies, was 0.13% lower at 103.820, trading below a two-decade high of 105.79, reached on June 15 after the Fed raised borrowing costs by 75 basis points to curb rising inflation.

The dollar and the relative safety of dollar-denominated assets were supported by fears that these Fed actions could trigger a global economic downturn.

On Friday, however, the final June reading of the widely watched University of Michigan consumer sentiment index fell to a record low, suggesting that Americans are increasingly pessimistic about the economic outlook in light of recent price increases. The gloomy sentiment may prompt some investors to reassess their forecasts for possible Fed rate hikes.

Major currencies in Europe strengthened against the dollar. GBP/USD increased 0.12% to $1.2278, while EUR/USD increased 0.05% to $1.0559 ahead of a key European Central Bank meeting this week in Portugal.

The Chinese yuan is holding near the zero line after Shanghai authorities announced that the city had defeated the recent COVID-19 outbreak.

In Russia, the USD/RUB was also steady at 53.40 per dollar after a deadline passed for Moscow to repay foreign debt, potentially sending the country toward a default.