The dollar gained at the beginning of today’s session. However, the coin later turned around, wiping out some of those gains. Traders await clues on future policy from the US Federal Reserve. However, OPEC+ made an announcement that will influence the market.
On Sunday, the Organization of the Petroleum Exporting Countries, also known as OPEC, and its allies made a statement that boosted oil prices. OPEC+ intends to achieve cuts in oil production. This isn’t the first time the organization has cut production, but oil prices still soared about 8% in early trading in Asia today. Brent crude soared 5.1%. It was finally trading at $84 per barrel.
Investors expected OPEC+ to keep its cuts at the current level (2 million barrels per day) until the end of this year. However, the organization announced that it would make further production cuts, cutting output by around 1.16 million bpd.
Mohamad Al-Saraf, Associate FX and Rates Strategy at Danske Bank, noted that oil prices could continue to rise in the near future. In such a case, global inflation is likely to rise again. If the banking turmoil also continues, traders will once again focus on the inflation outlook.
Meanwhile, the US dollar fell after advancing when the news first surprised markets. As safe haven currencies, they often win during uncertainty. But investor attention turned to central bank policy later in the session and the dollar began to fall.
On Friday, new data showed that core price growth accelerated in the eurozone. Economists believe that the European Central Bank could decide to offer further rate hikes based on this data. At the same time, in the United States, a measure of core inflation came in at 4.6%, slightly below what analysts had expected.
What do the analysts say?
Niels Christensen, chief analyst at Nordea, stated that interest rate differentials are currently influencing the EUR/USD pair. Last week’s data should support the ECB’s hawkish policy. Therefore, it was surprising to see the common currency trading in the red on Monday morning.
The dollar index plunged 0.4% to 102.49 against a basket of six major currencies on Monday. Meanwhile, the euro fell to a one-week low, trading at $1.0788 early in the session. However, the coin later rallied, rising 0.2% to $1.0865 at last. The British pound was also up 0.2% during this session. It traded at $1.2357 on Monday. But the dollar rose 0.1% against the Swiss franc.
This week, traders will focus on the US activity data as well as the jobs report due out on Friday. However, many markets will stop trading for the Easter holidays at the end of the week. Nordea’s Christensen noted that if the US data turns out to be strong, market participants could change their rate hike expectations. The dollar could get some support in that scenario.
In Asia, the Australian dollar jumped 0.6% to $0.6724. Investors await the Reserve Bank of Australia’s monetary policy meeting on Tuesday. According to surveys, there is an 85% chance that the central bank will maintain its current interest rates without adding new ones.
The Japanese yen declined today. The dollar added 0.3% to 133.23 yen after soaring to its highest peak since March 17 in the previous session. In addition, oil-sensitive currencies rallied, buoyed by rising oil prices. Both the Norwegian krone and the Canadian dollar were trading in the green today.
What about emerging market currencies?
Most of the emerging Asian currencies ended in bearish territory on Monday. The Thai baht and the South Korean won struggled the most. The Thai baht plunged almost 1.2% while the South Korean won fell as much as 1.5% during this session.
In emerging Asia, the won is currently the worst performing currency. It has decreased by almost 4% in the last year. The Philippine peso, the Malaysian ringgit and the Singapore dollar also fell between 0.2% and 0.5%.
Asian factory activity data came in weaker than analysts had expected, adding to pressure on Asian markets. Some economists think it could point to a potential economic downturn in the region. That news weighed on market sentiment.
However, in Indonesia, inflation fell to its lowest level in seven months in March. Prices increased much slower than usual. Markets in Taiwan were not operating due to a public holiday.
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