The dollar rose to its highest level in five weeks against a basket of major currencies on Monday as the safe-haven currency benefited from domestic inflation concerns and global growth worries. The gains also followed last week’s biggest weekly gain since September. Meanwhile, the Turkish lira fell to a two-month low after a weekend election that appears headed for a second round. Meanwhile, the Thai baht gained nearly 1% after Thailand’s opposition defeated military-allied parties in a weekend poll. The greenback was supported by rising Treasury yields after a survey of U.S. consumers’ long-term inflation expectations jumped to their highest since 2011, suggesting the federal funds rate could rise next month, according to the FedWatch tool. Traders are now putting the odds of a rate hike at 13%, which was virtually non-existent before the University of Michigan poll. However, there is still a three-quarter-point cut that the market is pricing in by the end of the year. Joseph Capurso, head of international economics at the Commonwealth Bank of Australia (CBA), said that, "In our view, there are too many FOMC (Fed) rate cuts in the near term". "He acknowledged that there are tentative signs that the US labour market is improving and underlying inflation is easing, suggesting there is a high bar for rate increases. However, he added that persistently high inflation and a tight labour market also suggest a high bar for rate cuts in the near term," he continued. Meanwhile, China has become the focus of renewed concerns about a global recession after a series of disappointing economic data, including import and inflation figures that pointed to weak domestic demand. The retail sales report due on Tuesday could provide further evidence.
 
On Monday, the Chinese yuan fell to a fresh two-month low of 6.9740 per dollar (USDCNH) in offshore trading, before recovering slightly to 6.9694. The People's Bank of China kept the seven-day reverse repo rate unchanged at 2%. The dollar index, which measures the US currency against a basket of six major currencies, hit 102.75 in early Asian trading on Monday, its highest level since April 10. It later fell slightly to 102.63. The dollar gained 1.4% last week. Capurso said the dollar was previously oversold and the dollar index should hit the CBA's end-June target of 104 this week.
 
The 10-year Treasury yield (US10Y) was little changed in Tokyo, hovering around 3.47%. That continued to pressure the yen, which tends to move inversely to longer-term U.S. yields. The Japanese currency weakened and hit a low of 136.03 per dollar USDJPY before settling at 135.80 in late trading. The euro (EURUSD) rose 0.11% to $1.08605 after falling to a fresh five-week low of $1.08445 earlier in the session. The U.S. dollar, meanwhile, gained 0.31% against the Turkish lira (USDTRY), after earlier hitting a fresh high since March 10 at 19.70.

Turkey is set for a second round of voting after President Tayyip Erdogan led in projections, though he failed to secure an outright majority. The US currency, USDTHB, weakened 0.65% to 33.76 baht in onshore Thai trade, after earlier falling as much as 0.92%. Meanwhile, Thailand's opposition party won a surprise victory in Sunday's election, but it remains uncertain whether it will form the next government with parliamentary rules written by the military junta.

Also Read : Daily Technical Analysis: May 11, 2023 – US Dollar Movement Fluctuates

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