Forex Today: US Dollar stabilizes following sharp decline
Here is what you need to know on Tuesday, February 10:
The US Dollar (USD) stays resilient against its rivals early Tuesday after suffering large losses on Monday. The US economic calendar will feature Export Price Index, Import Price Index and Retail Sales data for December. Additionally, several Federal Reserve (Fed) policymakers will be delivering speeches.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.78% | -0.60% | -1.24% | -0.79% | -0.86% | -0.41% | -1.30% | |
| EUR | 0.78% | 0.19% | -0.56% | -0.01% | -0.08% | 0.37% | -0.53% | |
| GBP | 0.60% | -0.19% | -0.43% | -0.20% | -0.27% | 0.18% | -0.71% | |
| JPY | 1.24% | 0.56% | 0.43% | 0.52% | 0.45% | 0.91% | -0.11% | |
| CAD | 0.79% | 0.01% | 0.20% | -0.52% | 0.03% | 0.39% | -0.51% | |
| AUD | 0.86% | 0.08% | 0.27% | -0.45% | -0.03% | 0.45% | -0.44% | |
| NZD | 0.41% | -0.37% | -0.18% | -0.91% | -0.39% | -0.45% | -0.89% | |
| CHF | 1.30% | 0.53% | 0.71% | 0.11% | 0.51% | 0.44% | 0.89% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
According to Bloomberg, Chinese regulators have verbally advised financial institutions to curb holdings of US Treasuries, citing growing concerns over concentration risk and market volatility. This development weighed heavily on the USD on Monday, with the USD Index losing more than 0.8% on the day. Early Tuesday, the USD Index holds steady at around 97.00 and US stock index futures trade mixed. Meanwhile, the benchmark 10-year US Treasury bond yield stays in the red below 4.2%.
GBP/USD benefited from the broad-based USD weakness and rose more than 0.6% on Monday. The pair corrects lower and trades below 1.3700 in the European session on Tuesday. Bank of England (BoE) policymaker Catherine Mann said on Monday that US tariffs are feeding into higher UK inflation through Chinese export pricing.
EUR/USD rose more than 0.8% on Monday and erased the previous week's losses. The pair stays in a consolidation phase at around 1.1900 in the European morning. The data from the Eurozone showed on Monday that the Sentix Investor Confidence improved to 4.2 in February from -1.8 in January.
The selling pressure surrounding the USD and growing risks of an intervention by the Bank of Japan following the election outcome caused USD/JPY to turn south Monday. After losing nearly 1% and snapping a six-day winning streak, USD/JPY continues to stretch lower early Tuesday and was last seen trading at around 155.50.
The cautious market stance helped Gold start the week on a bullish note. XAU/USD rose nearly 2% on Monday and closed above $5,050. The previous metal corrects lower in the European morning and trades near $5,030. Similarly, Silver rose nearly 7% on Monday and retraced a portion of the previous week's decline. XAG/USD struggles to preserve its bullish momentum and trades in the red below $82.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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