May 19, 2022 04:25AM ET
By: AnalysisWatch
The euro rose on Thursday as investors priced in the possibility of the European Central Bank tightening short-term interest rates, while the safe-haven dollar took a breather after significant gains in previous sessions.
Money markets are currently pricing in 106 basis points (bps) of ECB rate hikes, up from 95 bps on Tuesday, before ECB official Klaas Knot signalled that a 50 bps rate hike in July was possible.
US money markets, meanwhile, continue to discount about 200 basis points of Fed rate hikes by December 2022.
Risk appetite in the currency market is fragile as stocks fell, following a sharp sell-off on Wall Street, with investors worried about global inflation and the war in Ukraine.
On Thursday, more Shanghai residents were free to buy food for the first time in nearly two months as authorities set out more plans to get out of the COVID-19 city shutdown more fully.
The dollar index, which compares the greenback with six major peers, was down 0.03 per cent at 103.77, after rising 0.55 per cent on Wednesday, ending a three-day losing streak.
The euro was up 0.2 per cent at 1.048 against the dollar.
The Japanese yen, which lost ground against the dollar in March and April, has moved in a range recently.
On Thursday it fell 0.2 per cent to 128.5.
On Tuesday, the Bank of Japan said it intended to maintain its dovish stance and maintain the current monetary stimulus to create a sustainable rise in prices.
Strong economic data, coupled with expectations of further monetary tightening, supported the Australian dollar, which rose 0.2 per cent to 0.6969 against the US currency.
The Canadian dollar also rises after official data showed on Wednesday that the annual inflation rate rose faster than expected in April, increasing pressure on the central bank to tighten policy quickly.
It rose 0.3 per cent to 1.285 against the US dollar.
Bitcoin fell about 0.1 per cent and was last trading at $29,232. Ether fell almost 2.5 per cent below $2,000.