Cryptocurrencies pause after weekend battering, other currencies wait for Fed

“The Fed has got the markets on the leash. And this week, it will once again be a push and pull,” said Frederic Neumann, co-head of Asian economics research at HSBC, in a morning note.

Attempts to predict when and how quickly central banks will raise interest rates and complete the stimulus programs launched when COVID-19 emerged is a major factor driving the currency markets at the moment.

“What will prompt investors to step up about it will be the guidance that President Powell may provide at his press conference on quantitative tightening later in 2022,” Newman said, adding that he did not expect a change in policy.

The Federal Open Market Committee that sets the interest rate begins its two-day meeting on Tuesday as some analysts began to speculate that it is possible, although not likely, to raise interest rates for the first time since the pandemic began.

Analysts at the Commonwealth Bank of Australia said in a note.

“A bullish statement and/or a faster end to the quantitative easing program could encourage markets to price the risks of a 50 basis point rate hike in March,” they added, saying they believed this would lead to an unexpected higher reaction in the dollar. .

The dollar index, which measures the greenback against six major currencies, settled at 95,682 on Monday morning.

Also on the agenda this week are the Bank of Canada’s January meeting, concluding just before the Fed, where a rate hike is likely, and Australian inflation data due on Tuesday, which will guide the RBA’s stance at its next meeting. Month.

On Monday morning, the Australian dollar was at $0.7180, the lower end of its recent range. The risk-friendly currency was sold off late last week as traders abandoned assets like stocks, as well as riskier assets like cryptocurrencies.

Bitcoin was at $36,026, after dropping 10% on Friday and dropping to $34,000 on Saturday, its lowest level since July 2021.

The value of the world’s largest cryptocurrency has nearly halved since hitting a record high of $69,000 in November.

The sell-off hurt most digital assets, and the value of Ether, the world’s second largest cryptocurrency, reached $2,516, after also hitting its lowest level since July on Saturday, which was $2,300.

Traders say that as institutional investors increase their exposure to cryptocurrencies, their moves are closely correlated with other risk assets.

The Nasdaq Composite lost 7.55% last week, its worst week since March 2020.

Returning to the traditional currency markets, the British pound was near a two-week low of $1.3551, and the Euro was at $1.1333.

The yen was at the stronger end of its recent range, with the dollar at 113.7 yen not far from the 113.47 it touched 10 days ago. A drop below that level would be a five-week low for the dollar.

MI