The US Dollar (USD) extended its decline on Tuesday as US markets opened after a long weekend, following the Memorial Day bank holiday on Monday. The Greenback eased as risk-on sentiment prevailed, fueled by comments from Japanese Finance Minister Shun’ichi Suzuki warning against speculators seeking to devalue the Japanese Yen. Meanwhile, the US Treasury is set to auction four bond issuances across various maturities, with three Federal Reserve (Fed) speakers scheduled to make comments on Tuesday.
On the data front, the March Housing Price Index showed underperformance, with February’s numbers surpassing March’s figures. The upcoming releases include May’s Conference Board Consumer Confidence and the Dallas Fed’s Manufacturing Business Index for May. The US Treasury will conduct four bond auctions, including 3-month, 6-month bills, and 2-year, 5-year notes. Fed speakers, including Federal Reserve Bank of Minneapolis President Neel Kashkari and Federal Reserve Bank of San Francisco President Mary Daly, are also lined up to discuss monetary policy.
Equities were relatively flat, with the CME Fedwatch Tool predicting a 99.1% chance of no change in the policy rate for June. The benchmark 10-year US Treasury Note traded around 4.46% ahead of the US market opening. The US Dollar Index (DXY) faced technical challenges as it tested key support levels but needed to reclaim lost levels to avoid further decline.
The Federal Reserve (Fed) plays a crucial role in shaping US monetary policy, with its mandates focusing on achieving price stability and fostering full employment by adjusting interest rates. The Fed holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes policy decisions. In extreme situations, the Fed may resort to Quantitative Easing (QE) to increase credit flow, while Quantitative Tightening (QT) involves reducing bond purchases to strengthen the US Dollar.
In conclusion, the US Dollar continued to weaken against its counterparts as markets digested comments from Fed speakers and awaited key economic data releases. The outlook for the Greenback remained uncertain, with technical factors and Fed policies influencing its trajectory. Investors closely monitored developments in US markets and the impact on exchange rates amid ongoing global economic uncertainties.
