# Dollar creeps up in subdued start to new year Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-01-02 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Dollar Edges Up from Six-Month Lows Amid Fed Uncertainty Meta Description: The dollar strengthened as markets bet on the end of a Federal Reserve tightening cycle, despite subdued sentiment on the first trading day of the year. URL: https://financedigest.com/dollar-creeps-up-in-subdued-start-to-new-yearhtml By Dhara Ranasinghe LONDON (Reuters) -The dollar edged up on Monday, pulling away from recent six-month lows against a basket of major currencies. The U.S. currency has weakened as markets bet a Federal Reserve tightening cycle may be [nearing an end](https://www.financedigest.com/exclusive-nissan-seeks-tech-tie-up-without-renault-as-alliance-nears-end-of-road.html "Exclusive-Nissan seeks tech tie-up without Renault as alliance nears end of road"). [Sentiment remained](https://www.financedigest.com/6-months-to-go-until-brexit-and-investor-sentiment-remains-bold.html "6 months to go until Brexit and investor sentiment remains bold") fragile and the first trading day of the year was subdued, with many countries, including big trading centres such as Britain and Japan, closed for a holiday. The dollar index, which measures the value of the greenback against a basket of [major currencies](https://www.financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fades.html "U.S. dollar advances vs major currencies as risk appetite fades"), rose by around 0.14% to 103.63 – off roughly six-month lows hit last week at around 103.38. The euro slipped by about a third of a percent to $1.0683, but was not far from its highest levels [since June](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020"). Sterling was down 0.35% at $1.2051. Against the yen, the dollar fell 0.25% to 130.76, having [hit its lowest levels since August last month](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks"). There is an attempt by the dollar index to pull higher today but we do [see that it is losing a good part of the strength it gained last year,”](https://www.financedigest.com/10-year-david-goliath-crusade-finally-sees-justice-for-off-plan-spanish-property-buyers.html "10 year ‘David & Goliath’ crusade finally sees justice for off-plan Spanish property buyers") Ulrich Leuchtmann, head of forex research at Commerzbank, said. After the last Fed meeting, the [market was not convinced that the Fed](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") won’t cut rates later in 2023. It’s going to be an interesting year.” Having raised [rates by a total of 425 basis points since March to curb surging inflation](https://www.financedigest.com/german-inflation-rate-to-ease-over-course-of-2023-econ-minister.html "German inflation rate to ease over course of 2023 – econ minister"), the Fed has started to slow the pace of hikes. That [Fed tightening helped lift the dollar](https://www.financedigest.com/dollar-pauses-for-breath-as-fed-swings-into-focus.html "Dollar pauses for breath as Fed swings into focus") index 8% last year in its biggest annual jump since 2015. Markets remain focused on central [banks and inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel"), as well as signals of how long and deep a recession might be. International Monetary Fund Managing Director Kristalina Georgieva said on Sunday that 2023 would be a tough [year for the global](https://www.financedigest.com/2021-the-year-of-the-global-workforce-for-british-small-businesses.html "2021: The Year of the Global Workforce for British small businesses ") economy. Data from China, meanwhile, showed [factory activity shrank for the third straight month](https://www.financedigest.com/japans-factory-output-posts-biggest-fall-in-8-months-on-weak-autos-chips-sectors.html "Japan’s factory output posts biggest fall in 8 months on weak autos, chips sectors") in December and at the sharpest pace in nearly three years. But a downturn in [euro zone manufacturing activity has likely passed its trough as supply chains recover and inflationary pressures](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") ease, a survey showed on Monday. S&P [Global’s final manufacturing Purchasing Managers’ Index](https://www.financedigest.com/2017-global-payroll-complexity-index-reveals.html "2017 Global Payroll Complexity Index Reveals ") bounced to 47.8 in December from November’s 47.1, matching a preliminary reading but still below the 50 mark separating growth from contraction. While the euro area economy is heading for a recession, concerns about gas supply over the winter have eased, [meaning a downturn may not be as bad as feared](https://www.financedigest.com/banking-turmoil-means-recession-fears-are-creeping-back.html "Banking turmoil means recession fears are creeping back") a few months ago. [Euro zone wages are growing quicker than thought and the European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") (ECB) must prevent this from adding to already high inflation, ECB chief Christine Lagarde said at the weekend. The recent euro strength is driven by a mix of things including both the [hawkish ECB](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") commentary and hopes of a peak in U.S. [rates,” said Danske Bank](https://www.financedigest.com/bank-of-englands-mann-doubles-down-on-backing-for-rate-hikes.html "Bank of England’s Mann doubles down on backing for rate hikes") chief analyst Piet Haines Christiansen. It is also [supported by hopes that the energy](https://www.financedigest.com/belgium-supports-energy-price-caps-suspending-trading-in-eu-power-crunch.html "Belgium supports energy price caps, suspending trading in EU power crunch") supply in natural gas is not as bad a situation as feared. (Reporting by Dhara Ranasinghe Additional reporting by Nell Mackenzie; Editing by Mark Potter and Barbara Lewis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---