More Pain Ahead for Dollar If Fed Reiterates ‘Do Whatever it Takes’ Commitment

Forex
© Reuters.  © Reuters.

By Yasin Ebrahim 

Invesing.com – The dollar moved off its session lows on Monday, but some have warned a sea of red could hit the greenback later this week if the Federal Reserve signals its ultra-loose monetary policy is on autopilot.

With just two days to go until the Federal Reserve unveils its rate decision and Chairman Jerome Powell delivers his press conference, ING warned that the dollar could extend losses Wednesday on reduced safe-haven demand should the central bank maintained its stance to do whatever it takes to cushion the economic fallout from the Covid-19 pandemic.

After a surge in March, the dollar has struggled to find its footing as the Federal Reserve’s stimulus measures, including an intervention to ramp-up supply of dollars, has prompted traders to boost bearish bets on the dollar,

The value of the net short dollar position was $ 11.51 billion for the week ended April 21, compared with a net short position of $ 11.39 billion for the prior week. That was the net short dollar position in nearly two years, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Friday.

The Federal Reserve’s two-day meeting, which gets underway tomorrow, is widely expected to culminate in an unchanged decision on interest rates. But investors are likely to scrutinise the policy statement and the Powell’s press conference for insight into the Fed’s thinking on monetary policy and the impact of the Covid-19 pandemic on the economy.

Just a little over a week ago the Fed said in its beige book report that economic growth had contracted sharply and abruptly in recent weeks and waned more job cuts were expected in the coming weeks.

Also supporting the dollar’s move off its session lows, and moved off session highs to trade about 0.4% and 0.1% higher respectively, ahead of monetary policy decision from the Bank of England and European Central Bank expected in the coming days.

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