Dollar Declines, Bitcoin Pulls Back from Record Peak
On Tuesday, the dollar experienced a slight decline against a basket of currencies, following reports of eased growth in the U.S. services industry and as investors prepared for a busy week, which includes a European Central Bank rate decision, congressional testimony from Federal Reserve Chair Jerome Powell, and U.S. jobs data.
Bitcoin, the world’s largest cryptocurrency, reached a record high before undergoing a sharp retreat in a volatile session. It has surged nearly 50% this year, fueled by investors channeling funds into U.S. spot exchange-traded crypto products and the anticipation of global interest rates decreasing. After reaching as high as $69,202, Bitcoin was last down 7.04% at $62,745.23.
In February, U.S. services industry growth saw a slight deceleration, primarily due to a decline in employment, according to Institute for Supply Management (ISM) data. Additionally, separate data revealed that new orders for U.S.-manufactured goods dropped more than anticipated in January. Stuart Cole, Chief Economist at Equity Capital, noted, “The ISM numbers today showed growth in the service sector slowed in February, in no small part due to a decline in employment levels, and that has raised some concerns about the strength of the U.S. economy.”
The dollar index, measuring the dollar against six major peers, edged down 0.04% to 103.8. Most major currency pairs traded within familiar ranges. Michael Brown, a Market Analyst at online broker Pepperstone in London, highlighted the subdued nature of the G10 FX world. He attributed the lack of conviction in trading to the upcoming events, including Powell’s testimony, the ECB decision, and the nonfarm payrolls report on Friday.
The dollar index has increased 2.3% for the year, propelled by better-than-expected U.S. economic data. However, its recent rally has stalled as investors await clarity on Federal Reserve policy. Powell is expected to reiterate that the Fed intends to wait for more data before considering any rate cuts when he testifies to Congress about inflation and the economy on Wednesday and Thursday.
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