The U.S. dollar lost ground against its main rivals on Monday, extending a protracted span of weakness for the monetary unit so far in 2018.
Trading action was thin as major markets were closed in Europe in observance of Easter Monday after much of Wall Street, although not currency markets, were closed at the end of last week ahead of the Easter and Passover holidays.
What are currencies doing?
The ICE U.S. Dollar Index DXY, -0.14% which gauges the buck’s performance against a half-dozen rivals, slipped 0.3% to 89.903. The popular dollar index retreated about 0.5% in March and lost 2.1% in the first three months of the year. The WSJ U.S. Dollar Index BUXX, -0.01% a gauge of the greenback against 16 rivals, fell less than 0.1% to 83.70. The gauge fell 2.7% in the first quarter.
The euro EURUSD, +0.0893% was at $1.2329, strengthening only slightly from $1.2324 late Friday in New York. In the first quarter of the year, the euro rallied 2.8% against the dollar and gained about 1.2% last month.
The British pound GBPUSD, +0.3210% traded at $1.4056, compared with $1.4017 late Friday in New York. Sterling strengthened more than 2% against the dollar in March and booked a 4% rise against the currency during the quarter as Britain’s formal exit from the European Union is less than one year away.
The greenback was little changed against the Japanese yen USDJPY, +0.19% buying ¥106.27, compared with ¥106.24 late Friday. The dollar softened by about 5.8% against the yen in the first quarter but gained 0.4% in March.
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What is driving the market?
The dollar’s Monday moves are partly being attributed to concerns about the threat of a global trade war, after as China imposed tariffs on a range of U.S. agricultural goods, intensifying protectionist trade policies between the two economic powers. Concerns about trade conflicts have appeared to hit the buck more intensely than other assets, including stocks and government bonds.
Currency investors also are preparing for more economic reports throughout the week, including the nonfarm-payrolls report on Friday, which could inform policy by the Federal Reserve. The bank is expected to lift interest rates three times in 2018.
Which data are ahead?
The Markit manufacturing purchasing managers index for March is due at 9:45 a.m. Eastern Time, followed by the more closely watched Institute for Supply Management manufacturing index for March at 10 a.m., with construction spending for February due at the same time.
What are strategists saying?
“Given that one of the main arguments in markets today is whether the Fed will raise rates by another 2 or 3 times in 2018, this figure will play an important role in pricing interest rates expectations, and thus the dollar’s direction,” wrote Hussein Sayed, chief market strategist at FXTM in a Monday research note.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in a Sunday research note that yen’s recent strengthening trend against the buck should be watched for breakthroughs at key levels:
“We do not know the new broad range yet, but there does appear to be a near-term range. The floor is had been JPY105, but now it JPY104.55. A break would suggest potential toward JPY100. On the upside, the JPY107 is the nearby cap, but JPY108 may be more significant. The upper end of the broad range may come in around JPY110,” he wrote.
Which other assets are in focus?
The Dow Jones Industrial Average DJIA, +1.07% and the S&P 500 index SPX, +1.38% looked set to decline on Monday as investors digested the news of fresh China tariffs on U.S. imports amid concerns of a trade war.