The dollar managed to be resilient following its steep plunge last week, with a value steady above its three-year low against a basket of currencies.
The dollar index, which gauges the strength of the dollar against six other major currencies, held steady at 84.045. It slightly bounced on Friday after a major slide to 88.253, the lowest it reached since December 2014.
Various factors have bugged the greenback this year. Concerns that the US would implement a weak dollar strategy contributed to the dollar’s drop. In addition, the currency’s yield advantage has also been seen diminishing as other countries begin tapering off from their easy monetary policy.
Moreover, the dollar has also been weighed down by escalating worries about the US budget deficit, which is seen rocketing to $1 trillion in 2019 amid the government’s conspicuous spending and huge corporate tax cuts.
Analysts agree that these factors persist and will not disappear quickly. However, last week’s erratic downturn seemed to push some buyers to wade in and pick up the currency at a bargain price.
Meanwhile, the euro was virtually untouched at $1.2423. It has leaped to a three-year high of $1.2556 on Friday before losing 0.7 percent. The common currency is among the factors that have pulled the dollar down this year.
PMI Readings and European Central Bank’s Meeting
The readings on the preliminary February Euro-Zone PMI are set to be finished on Wednesday this week, attracting much of the attention of analysts and other observers. The figures are expected to help shape the market’s perception of the region’s prospects for growth.
According to a general consensus, the first reading for the Manufacturing PMI is expected to come in at 59.2 from 59.6, which is an insignificant drop from all-time highs. The decrease is considered immaterial since traders tend to wait for a substantially larger drop before they reconsider their optimism over the currency’s prospects.
On the other hand, Thursday is set to see the minutes of the European Central Bank’s January meeting. Unlike the January release, this month’s minutes are not expected to have ‘hard’ information. The January release covered December meetings in which a new set of Staff Economic Projections was revealed. For this month’s release, explicit discussions regarding the trade-weighted appreciation of the common currency have been barred, leaving limited prospects for the minutes to leave a mark.
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