US Dollar Rising: Friday saw the U.S. dollar reach its highest level in two months, marking its sixth week of advances. Investors anxiously await Federal Reserve Chair Jerome Powell’s interest rate outlook speech. ET (1405 GMT) is expected to clarify the duration of high rates and the end of rate rises.
The dollar index rose 0.173% to 104.25, its highest level since June 7. The index ended its two-month slide with a more than 2% surge in August.
– Financial experts, including OCBC Singapore’s Christopher Wong, expect Powell to advocate “higher for longer.” The U.S. economy’s durability is astounding. Wong also warns of hazards if Powell becomes less proactive on monetary tightness.
– Other Federal Reserve officials are cautiously optimistic about bond yields rising. Philadelphia Fed President Patrick Harker and Boston Fed President Susan Collins suggested that the current yield may support the U.S. central bank’s economic moderating efforts in separate meetings.
Recent Economic Data and Market Speculations: The significant drop in jobless claims indicates a strong labor market.
– Recession fears have been reduced by economic strength. However, with inflation still over the Federal Reserve’s objective, concerns remain about high-interest rates.
Read More: Asian Stocks Decline: US Dollar Gains Amidst Inflation Data and Market Volatility
– Tom Hopkins of BRI Wealth Management doubted rate decreases commencing in May next year. He suggested that the economy may not warrant monetary cuts.
– Futures markets expect the Fed’s overnight lending rate to stay above 5% until June 2024. Early in August, 130 basis points of 2024 reductions were predicted.
Global Currency Movements – The euro fell 0.28% to $1.0779 due to the rising U.S. dollar. The British pound fell 0.29% to $1.2563. These values are the lowest since mid-June for both currencies. The yen fell 0.19% to 146.10 per dollar. This currency dynamic has traders on edge, recalling Japan’s intervention last year.
– Tokyo’s core inflation rose in June, exceeding the central bank’s 2% target for over a year. This Tokyo tendency is typical of nationwide tendencies, fueling worry about the Bank of Japan’s stimulus withdrawal this year.
– Foreign currencies like the Australian and New Zealand dollars fell. The former fell 0.20% to $0.641 and the latter 0.27% to $0.590.
With Federal Reserve Chair Jerome Powell’s upcoming speech, global economic talks center on the U.S. dollar’s steady growth. His interest rate comments, economic statistics, and trends will shape U.S. and worldwide monetary plans.
Our Reader’s Queries
Why is the U.S. dollar increasing?
The value of the dollar rises when there is an increase in demand for it. On the other hand, if the demand for the dollar decreases, its value also decreases. The demand for the dollar is influenced by international parties such as foreign citizens, foreign central banks, or foreign financial institutions who require more dollars.
Will U.S. dollar strengthen in 2023?
Despite strong global growth, the US dollar managed to hold its value in 2023, and it looks like the trend could continue into 2024, as per Isabella Rosenberg from Goldman Sachs Research. This is a unique occurrence, but it’s a positive sign for the US economy.
Will the dollar get stronger in 2024?
According to a recent Reuters poll of 71 FX strategists, the dollar is expected to weaken against G10 currencies in 2024. The majority of this decline is anticipated to occur in the latter half of the year.
Why is the dollar rallying?
The recent decrease in inflation and the Federal Reserve’s more cautious approach during their December policy meeting have led to speculation of multiple interest rate cuts in the United States in 2024. This has caused the value of the dollar to decline and has resulted in a surge in both Treasury bonds and stocks during the months of November and December. As a result, the dollar index has reached a five-month low of 100.61.