The U.S. dollar pared some of last week's impressive gains as investors scaled back expectations that the Federal Reserve will raise its key lending rate sooner than previously expected.
he greenback soared to a new eight and a half-month, trade-weighted high last week after the Fed announced a 25 basis-point hike in the discount rate, the rate it charges commercial banks for emergency loans. The mostly technical adjustment to bring the discount rate back toward its historical premium over the Fed's primary lending rate, the fed funds rate, fanned speculation that U.S. officials may be closer to normalizing broader monetary conditions and boosted the U.S. dollar's yield appeal relative to its major counterparts. Firmer stocks and generally improved investors sentiment overnight helped encourage some profit-taking on the USD's rally in favor of riskier investments abroad.
Reports that Germany is putting together a bailout for Greece that will be funded by all nations using the euro currency helped alleviate some concerns about sovereign credit risk further boosting market sentiment.
The rise in crude oil back above $80/barrel boosted the Canadian dollar and kept it trading at a one-month peak against its U.S. counterpart.
With no economic data on tap today, investors will look to a speech by San Francisco Fed President Janet Yellen for direction. Firmer stocks and commodities would keep the greenback near the lower end of it overnight ranges.
USD: The U.S. dollar pared some of last week's gains against most of its major counterparts overnight. Investors were content to book some profits on the greenback's rise following the Federal Reserve's hike of the discount rate late last Thursday. The Fed announced that it had raised the rate it charges banks on emergency funds by 25 basis points to 0.75%. Officials had signaled that such a move could be imminent in the minutes from the FOMC's policy meeting released earlier last week.
