US$ touches 20-year high as markets shun risk

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The U.S. greenback reached a brand new 20-year high on Monday as risk-off sentiment stemming partially from considerations over the Federal Reserve’s means to fight high inflation boosted the dollar’s safe-haven attraction.

The greenback has risen for 5 straight weeks as U.S. Treasury yields have climbed on expectations the Fed can be aggressive in trying to tamp down inflation.

On Monday, Minneapolis Fed President Neel Kashkari stated the U.S. central financial institution might not get as a lot assist from easing provide chains as it’s hoping for in serving to to chill inflation. Atlanta Fed President Raphael Bostic stated he already sees indicators of peaking provide pressures and that ought to give the Fed room to hike at half-percentage-point rate of interest increments for the following two to 3 coverage conferences, however nothing larger.

Also contributing to the defensive tone was the continued battle in Ukraine and considerations about rising COVID-19 circumstances in China.

“Right now, it looks like you’ve got a trifecta of drivers right here which are going to maintain offering the greenback with strong footing,” stated Edward Moya, senior market analyst at Oanda in New York.

“There’s this perception that you’re not going to see any of the main risk components resolved, undoubtedly not this week, and that’s most likely going to make it difficult for ending the greenback’s reign.”

The greenback index =USD fell 0.135% at 103.630 after touching 104.19, its highest stage since December 2002, with the euro EUR= up 0.15% to $1.0567.

The Fed final week raised charges by 50 foundation factors as it makes an attempt to decrease inflation with out tilting the financial system right into a recession, whereas a strong jobs report on Friday cemented expectations for extra fee hikes. Investors will get a have a look at extra inflation readings later this week within the type of the patron worth and producer worth indexes.

Yields on most U.S. Treasury notes pared early positive aspects to commerce decrease on Monday as bargain-hunters stepped in after the benchmark 10-year yield hit recent 3-1/2-year highs of three.203% as inflation fears continued to roil markets.

On Wall Street, shares have been buying and selling sharply decrease as development shares have been once more weighed down by climbing Treasury yields, though main averages have been off their worst ranges of the day after hitting recent lows for the yr.

Markets are fully pricing in a fee hike of not less than 50 foundation factors by the Fed at its June assembly, in line with CME Group’s FedWatch Tool.

The Japanese yen JPY= strengthened 0.24% versus the dollar at 130.28 per greenback, whereas Sterling GBP= was final buying and selling at $1.2343, up 0.05% on the day.

In cryptocurrencies, Bitcoin BTC= final fell 14.93% to $30,679.52 after dropping to $30,321, its lowest since July 21, 2021.

Ethereum ETH=, ETH=BTSP final fell 16.21% to $2,266.33.- Reuters



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