Dollar set for biggest winning streak in two years on trade optimism. Hopes of a breakthrough in US-China trade talks encouraged investors to cover short bets on the currency.
At the end of 2018, the dollar was the consensus short trade among hedge funds. Traders bet the U.S. Federal Reserve would pause in its rate increases and other major economies would grow quickly.
While the Fed held interest rates steady last month, the case for buying the euro and the pound has weakened steadily. Economic data in Europe have deteriorated and Brexit concerns have dogged the British pound. The greenback’s recent strength has emerged despite the Federal Reserve striking a cautious tone at its policy meeting in January.
The dollar has gained for nine consecutive sessions, its longest series of gains since February 2017. It was a touch higher at 97.063 on Tuesday.
On Jan. 30, the Fed said it would be “patient” before raising rates again. The Federal Reserve signalled its balance sheet would remain larger than previously expected.
Also helping the dollar were talks on trade between the United States and China. The talks resumed in Beijing this week after an earlier round ended in Washington last week without a deal. However, the top U.S. negotiator said a lot remained to be done.
START TRADINGForex – Commodities – Trade optimism lifts Dollar further
Despite the market concerns, overall currency volatility has fallen in recent weeks.
A Deutsche Bank gauge is trading near its lowest in six months at 7.5. It has fallen by nearly ¼ from early January highs.
The euro, meanwhile, has suffered from weak European economic data. On Tuesday, it held near the 2 1/2-month low of $1.1267 hit the day before.
Sterling was steady at $1.2878 before a statement by Prime Minister Theresa May to lawmakers in parliament.
With just weeks to go before Brexit on March 29, investors are growing increasingly worried that a Brexit deal may not be completed in time.
Sources: Reuters, Investing, CNN money
PLEASE NOTE The information above is not investment advice.