US Dollar Falls Owing To Profit-Taking As Equities Increase

4 October 2021 | Updated: 4 October 2021

The US dollar surrendered back some of its recent gains as US stock markets ended Friday on a good tone, supported by Merck’s oral Covid-19 therapy, which raised optimism of a lift in economic growth. US rates also dipped marginally on Friday, further hurting the US currency as calmer tensions reduced the haven bid. To 94.07, the dollar index declined 0.18 percent.

In Asia, the dollar index rose marginally to 94.10 as US 10-year futures dipped as the Democrat legislative gridlock deepened over the weekend. Overall, though, Asian currency markets are very calm today due to a lot of holidays in the region.

As the US dollar fell, the euro/dollar and the pound/dollar staged a corrective rebound on Friday. However, EUR/USD is still below 1.1650 as of today and is still close to the bottom of its weekly range. Only a rebound to 1.1660 can change the bearish outlook.

The pound rose 0.50% to 1.3545 against the dollar on Friday and fell slightly to 1.3535. The aggressive rebound had as much effect as the same aggressive sell-off last week. Regarding the British pound, whether it is energy or Northern Ireland/Europe, there are still a lot of risks of supply chain shortages. Only a breakthrough of 1.3620 will give a gasp signal.

The dollar against the yen has fallen back to 111.05 today, as the US yields slightly lowered, pushing the dollar lower on Friday. Despite the change of the prime minister and the upcoming elections, the USD/JPY is still a strict yield differential game. The pivot support position is still 110.50. The risk aversion sentiment eased on Friday.

As of today, the AUD/USD and NZD/USD have both gained above 0.50% to 0.7296 and 0.6980. Technically, both are still fragile, and any decline in risk sentiment is just a short break. After Covid-19 cases were reported outside of Auckland over the weekend, the NZD/USD fell today. However, the government will continue to relax Auckland’s restrictions this week and has already recovered all these losses.

US Dollar Drop in Value, Transitory Only

Since mainland China and South Korea are closed for the holidays, Asian currencies have had a relatively quiet session today, with most of their values remaining constant from their New York closures.

On Friday, Asian currencies reduced their losses as the US dollar fell, but the US dollar’s weakness is only transitory, and that its downturn will return, especially for the more susceptible INR, IDR, THB, and PHP.

However, ahead of Friday’s US Non-Farm Payrolls, investors could be in for a week of range trading. A fair percentage will re-energize the Fed’s taper and act as a negative for Asian currency markets.

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.