News
Dollar stable; Ether Fuels Cryptocurrency Rally
By Rae Wee
SINGAPORE (Reuters) – The dollar held steady on Tuesday, while the yen struggled on the weaker side of the 156 level, although trading was mostly range-bound as investors generally stuck to their views on the expected timing and size of the Federal Reserve’s rate cuts this year.
Cryptocurrencies rallied, led by a surge in ether in anticipation of an impending approval of spot ether exchange traded funds (ETFs) by the US Securities and Exchange Commission (SEC).
Against the yen, the dollar rose 0.07% to 156.37 early in the Asian session.
The yen has traded in a tight range in recent sessions as fears of further intervention by Japanese authorities have dissuaded traders from pushing the currency to new lows. However, still high interest rate differentials between the US and Japan have maintained the yen’s attractiveness as a funding currency.
Elsewhere, the euro rose 0.03% to $1.0860, while the pound rose 0.03% to $1.27095.
With little on this week’s U.S. economic data calendar to guide the direction of currency movements, attention turns to a series of Fed speakers for clues on the outlook for U.S. rates and how soon an easing cycle might begin .
Several officials on Monday called for continued policy caution, even after data last week showed a welcome easing of consumer price pressures in April.
“I think all the comments from various officials will convey more or less the same message, and the main message will be for the FOMC to continue to take a patient approach on interest rate cuts,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia.
However, the Fed’s cautious rhetoric has so far done little to significantly alter market pricing for rate cuts, with investors betting on two cuts this year starting in September.
The New Zealand dollar was little moved at $0.6107, while the Aussie rose 0.1% to $0.6674, ahead of minutes of the Reserve Bank of Australia’s May meeting due later on Tuesday.
Against a basket of currencies, the dollar settled at 104.61.
In the cryptoverse, ether jumped more than 5% to a more than one-month high of $3,691.80, after rising nearly 14% in the previous session — its biggest daily percentage gain since November 2022.
Likewise, Bitcoin charged more than 3% higher to break above the $70,000 level. It last bought $71,259.
Analysts said the latest rally in cryptocurrencies came on the back of speculation that approval of spot ether ETFs by the US SEC could be imminent, following in the footsteps of the listing of bitcoin ETFs earlier this year .
“It absolutely flew by,” said Tony Sycamore, a market analyst at IG. “I think it has partly to do with that speculation, but also with last week’s core (US) inflation data which strengthened risk appetite and obviously brought rate cuts back into play.
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“With the SEC approval in January and then the halving, there was a little bit of a catalyst missing in terms of what was going to be the next key driver for cryptocurrencies, and I think it was always going to come back to macro. And the macro situation has been really, really good since last Wednesday.”
(Reporting by Rae Wee; Editing by Shri Navaratnam)