The dollar fell 1.57% against a group of six currencies last week. Nervous investors seek to acquire other currencies that serve as a refuge
Faced with the possibility that the Federal Reserve of the United States could lower interest rates this year, the dollar has fallen against other currencies. It is reported that, meanwhile, the tensions between Iran and the United States offer greater stability to the Japanese yen (JPY) and the price of Bitcoin has been increasing significantly since last weekend.
Bitcoin, the most widely known cryptocurrency worldwide exceeded US $11,000 for the first time since March 2018. In this way, Bitcoin has increased by almost 200% until now this year; driven by the plan proposed by Facebook for the launch of Libra, arousing the enthusiasm for the use of cryptocurrencies.
Meanwhile, investors are waiting for a possible truce declaration in the trade war between the Presidents of the United States and China, Donald Trump and Xi Jinping respectively. This situation is occurring in the framework of the summit of the Group of 20 (G20) to be held in Osaka, Japan in June 2019.
Brian Daingerfield, Head of forex strategy in Stamford, Connecticut, said that the interest is on the dovish turn taken by the Federal Reserve and what may happen in the G20. He added that, with this group, it is difficult to trust the direction of the market.
In this way, the markets believe that if Washington and Beijing do not control their heated rhetoric about trade, then the Federal Reserve will be forced to reduce interest rates. The objective of this measure is to avoid a broader economic slowdown as a result of higher tariffs on US imports.
In this regard, the Vice Minister of Commerce of China, Wang Shouwen, said that both China and the United States should engage in trade negotiations.
Similarly, according to the FedWatch tool of the CME Group, federal funds futures indicate that there is a high probability that the Federal Reserve will cut rates in late July. These expectations have weakened the dollar, which fell by 1.57% against a group of six currencies. That was its biggest weekly loss in four months. This decline occurred amid the rise in the price of Bitcoin.
Hedge funds have also become slightly bearish about the dollar and bets have increased on the weakness of other currencies, such as the Australian dollar, whose position within the global economy has deteriorated.
The Japanese yen, for its part, lost some strength against the dollar, after Trump suspended a US military attack on Iran. Although the tensions between the two nations remain high, on June 24th the President of the United States imposed new sanctions on Iran in an attempt to curb its nuclear program.
However, the yen remained stable at 107.31 per dollar, after having reached 107.04 units per dollar on June 21st. Meanwhile, nervous traders seek to acquire safe-haven currencies. Among cryptocurrencies, Bitcoin has increased by 4.23% during the last week, with a price of US $11,323.81, according to LiveCoinWatch.
By Willmen Blanco