The dollar weakened in anticipation of Fed Chairman Powell’s speech and the US employment report from Investing.com

© Reuters

| By Peter Nurse, Investing.com |

The dollar fell in early European trade on Wednesday, as risk appetite rose on hopes of an easing of tight travel restrictions surrounding the coronavirus outbreak in China, although volatility was small ahead of a key speech by Fed Chairman Jerome Powell.

As of Wednesday morning, , which tracks the dollar against a basket of six other currencies, retreated by 0.2%, up to a level of 106.543 points.

In the local arena, the shekel traded in a mixed trend on Wednesday, with the shekel weakening against the shekel and falling 0.1% to a rate of 3.436 shekels to the dollar, while climbing 0.44% and trading at a level of 3.564 shekels to the euro.

China on Tuesday reported plans to speed up vaccination of its vulnerable elderly population, amid rising public protest against the country’s lockdowns. This development is seen as a sign that the Chinese authorities may be looking to reduce their anti-corona policies, although there has been no official confirmation.

That boosted risk appetite, with the currency pair down 0.2% to 7.1441 yuan to the dollar, and the yuan expected to post a 2% advance this month, even after shrinking more than expected in November as disruptions caused by coronavirus-related shutdowns continued to bite in growth

However, fluctuations in the foreign exchange market are relatively quiet on Wednesday, as traders prepare for a speech at the Hutchins Center for Fiscal and Monetary Policy at the Brookings Institution.

The Fed will meet in December to decide on the next step on the issue, and traders will study this speech, in addition to the research institute’s employment report, and the second report for the third quarter, for clues regarding the size of future interest rate hikes.

The prevailing expectation is that the pace of raising interest rates will slow down to 50 basis points on December 14, although some market players are still preparing for another interest rate hike of 75 basis points.

As a result, net short positions on the U.S. dollar climbed to their highest level since July 2021 last week, according to a report from the U.S. Commodity Futures Trading Commission released Monday.

The currency pair rose 0.2% to $1.0350 per euro, after climbing from a one-week low reached earlier on Wednesday, ahead of a November release.

CPI was weaker than expected on Tuesday, raising the possibility of a downside surprise in the EU CPI. This may indicate that inflation in the region has reached a peak, thus leading to bets on lowering the interest rate hikes of .

The pair was up 0.1% at $1.1963 per pound, the risk-sensitive currency climbed 0.5% at $0.6718 per Australian dollar, while the pair retreated 0.1% at 138.50 yen per dollar. , despite the news about the fall in factory output in Japan for the second time in a row in October.

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