Forex Today: US Dollar stabilizes as mood sours on rising Oil prices
Here is what you need to know on Tuesday, March 17:
Markets turn risk-averse on Tuesday as crude Oil prices rise again. In turn, the US Dollar (USD) benefits from safe-haven flows and holds its ground following Monday's selloff. The European economic calendar will feature ZEW sentiment data from Germany. In the second half of the day, February Pending Home Sales and ADP Employment Change 4-week Average data from the US will be watched closely by market participants. More importantly, the Federal Reserve's two-day policy meeting will start on Tuesday and the US central bank will announce the interest rate decision and publish the revised Summary of Economic Projections (SEP) on Wednesday.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | 0.07% | 0.10% | 0.00% | 0.07% | 0.62% | -0.01% | |
| EUR | -0.06% | 0.01% | 0.05% | -0.05% | 0.01% | 0.56% | -0.07% | |
| GBP | -0.07% | -0.01% | 0.04% | -0.06% | 0.00% | 0.55% | -0.08% | |
| JPY | -0.10% | -0.05% | -0.04% | -0.08% | -0.02% | 0.53% | -0.10% | |
| CAD | -0.01% | 0.05% | 0.06% | 0.08% | 0.06% | 0.61% | -0.02% | |
| AUD | -0.07% | -0.01% | -0.00% | 0.02% | -0.06% | 0.55% | -0.09% | |
| NZD | -0.62% | -0.56% | -0.55% | -0.53% | -0.61% | -0.55% | -0.63% | |
| CHF | 0.01% | 0.07% | 0.08% | 0.10% | 0.02% | 0.09% | 0.63% |
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).
Oil prices declined sharply on Monday as the United States' calls for forming a coalition with allies to secure the Strait of Hormuz eased supply concerns. After foreign ministers from the 27 European Union countries gathered in Brussels to discuss whether they should help secure the narrow waterway, EU foreign policy chief Kaja Kallas told reporters that there was no appetite for changing the mandate of the Operation Aspides, an EU naval force focused on responding to Houthi engagements with international shipping in the Red Sea. "This is not Europe's war," she noted and added that they are working on diplomatic solutions for the Strait of Hormuz. After falling more than 4% on Monday, the barrel of West Texas Intermediate (WTI) rises again and trades near $96, up about 3% on the day.
Reflecting the souring market mood, US stock index futures were last seen losing between 0.4% and 0.5%, while the USD Index was up about 0.1% at 99.90.
During the early trading hours of the Asian session, the Reserve Bank of Australia (RBA) announced that it raised the policy rate, Official Cash Rate (OCR), by 25 basis points (bps) to 4.10% from 3.85%. "The board judged that there is a material risk that inflation will remain above target for longer than previously anticipated," the RBA noted in its policy statement. In the post-meeting press conference, RBA Governor Michele Bullock explained that higher Oil prices were not the reason for the rate hike and said that the forward path for rates was uncertain. AUD/USD stays relatively calm and fluctuates above 0.7050 following the RBA event.
Gold continues to move sideways above $5,000 after registering marginal losses on Monday.
EUR/USD gained nearly 0.8% on Monday and snapped a four-day losing streak. The pair stays in a consolidation phase at around 1.1500 in the European morning on Tuesday.
GBP/USD struggles to build on Monday's recovery gains but holds steady slightly above 1.3300 in the early European session on Tuesday.
USD/JPY lost about 0.4% on Monday and tested 159.00 before recovering marginally early Tuesday. Bank of Japan (BoJ) Governor Kazuo Ueda said that underlying inflation is gradually accelerating toward the 2% target and added that they will guide the monetary policy appropriately to stably and durably achieve this target.
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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