By contrast, Atlanta Fed President Raphael Bostic said in an interview with CNBC that he expects just one more quarter point hike, followed by an extended pause.
“The market is pretty much resigned to a 25 bps hike at the May meeting, so it’s more the ebb and flow of expectations about rate cuts this year that’s causing U.S. bond market volatility,” said Ray Attrill, head of foreign-exchange strategist at National Australia Bank.
“It’s the volatility in the bond market that’s driving the dollar, not the other way round.”
The dollar’s decline on Tuesday was also spurred by reduced demand for its safety after what Attrill called “blockbuster” Chinese economic growth data that day, which in turn buoyed Australia’s risk-sensitive currency.
The Aussie AUD=D3 was about flat at $0.6730 on Wednesday, following a 0.41% rally in the prior session.
The euro EUR=EBS eased slightly to $1.0967 after Tuesday’s 0.42% rise. Sterling GBP=D3 slipped a touch to $1.2420 following the previous day’s 0.38% advance.
The dollar index last year culminated a breathless 16-month surge by hitting a two-decade high of 114.78 at the end of September, which was followed by a steep, steady retreat until the start of February.
It then bounced as a banking crisis ignited worries of a global recession, reaching a three-month peak in early March.
However, bank earnings from recent days have proved robust overall, and bond yields have recovered strongly from multi-month lows reached last month.
“A key driving force that used to support the broad USD -i.e., weakening global growth – has been fading, if not neutralised,” HSBC analysts wrote in a client note.
“Its decline is likely to be larger than some may think.”
World FX rates
(Reporting by Kevin Buckland; Editing by Jacqueline Wong and Edmund Klamann)
((Kevin.Buckland@thomsonreuters.com;))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
