SYDNEY/SINGAPORE- The dollar tried to extend a rally on Wednesday as chatter about the possibility of higher US interest rates and a sell-off in tech stocks soured risk sentiment to the benefit of the safe-haven currency.
The dollar’s bounce on Tuesday put pressure on the euro, which dropped to $1.2021 and threatened to breach important chart support in the $1.1995/1.2000 area.
“If sustained, this could suggest today’s session may be important for near-term direction, particularly if EURUSD managed to close below the key $1.20 pivot,” said Ned Rumpeltin, European head of FX strategy at TD Securities.
“We think we will need to see a daily close below the $1.20 mark to give more credence to observations that the USD tends to appreciate broadly during the month of May.”
Against a basket of currencies, the dollar was barely changed around 91.21 but away from a recent two-month low of 90.422. It needs to clear resistance at 91.425 to extend the rebound.
Rumpeltin noted that over the last 10 years, the dollar had averaged gains against each of its G10 counterparts in May.
The bounce was partly sparked by comments from US Treasury Secretary Janet Yellen that rate hikes may be needed to stop the economy overheating.
Yellen later downplayed their importance, but even the slightest mention of US tightening has an outsized impact in markets that have become so dependent on monetary stimulus. — Reuters
