Dollar Higher, but Analysts See Signs Fed Action Has Curb Greenback Demand

Forex
© Reuters.  © Reuters.

By Yasin Ebrahim

Invesing.com – The dollar was climbed against its rivals on Monday, with analysts continuing to suggest the path of direction for the greenback remains downward despite risk sentiment under pressure in the wake of slump in oil prices.

The , which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.19% to 100.02.

Over the past month, the dollar has struggled to build on its recent rally, which took the greenback to a more than three year high in mid-March, weighed down by the Federal Reserve’s recent intervention  to ramp-up supply of dollars to avert a potential funding crises.

“For the US dollar, the consolidation has also come with a downward tilt – reflecting the view that the Fed will buy more bonds than other central banks, thereby increasing the supply of dollars by more than other central banks increase the supply of other currencies,” Morgan Stanley (NYSE:) said in a note.

Others seem to agree, with Jefferies highlighting signs the dollar squeeze overseas may be on the wane.

“Foreign central banks holdings of Treasuries fell $ 161 billion from March 4 through April 8, but rose $ 13.7 billion this past week, the first increase since late February. This combination suggests that the dollar squeeze overseas is easing,” Jefferies said.

Underscoring the shift in sentiment on the dollar, data showed speculators increased their net short dollar position in the last week.

The value of the net short dollar position rose to $ 12.59 billion in the week ended April 14, from $ 10.5 billion the previous week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

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