Last Update: May 24, 2023, 23:49 IST
The dollar index, which tracks the US currency against six major peers, rose to 103.91, its highest level since March 20. The index last gained 0.299% to 103.83. (Image: File photo)
Washington impasse over debt ceiling talks has helped lift the dollar
The dollar rose to a new two-month high against a basket of peers on Wednesday as a resilient US economy helped strengthen the currency, while unease in Washington over debt ceiling talks prompted investors to flow to safe havens. inspired to.
The impasse in Washington over debt ceiling talks has helped lift the dollar even as it could lead to a default and push the US economy into recession as investors fear it spells worse for the global economic outlook. Can do.
Joe Manimbo, senior market analyst at Konevera in Washington, said central bank policy divergence has been a popular topic among FX investors this year, with a recent outlook suggesting the Federal Reserve will soon begin cutting rates.
“If you consider the global data of late, it is painting a more resilient picture of the US economy than Europe,” he said. “This could allow the dollar to maintain its yield advantage for a longer period of time,” Manimbo said.
Fed funds futures show a 28.6% chance the Fed will raise rates when its two-day policy meeting ends on June 14, according to CME Group’s FedWatch tool.
The dollar index, which tracks the US currency against six major peers, rose to 103.91, its highest level since March 20. The index last gained 0.299% to 103.83.
Mark Chandler, chief market strategist at Bannockburn Global Forex in New York, said he suspects debt ceiling talks have been a big factor in the forex market.
“The US dollar is rising more or less sharply in three weeks, helped by stronger-than-expected data and rising US interest rates,” he added.
Chandler said economic data could continue to support the dollar, as the Atlanta Federal Reserve Bank estimates the US economy grew at a 2.9% clip in the second quarter.
“My understanding would be that we don’t make a deal until the last minute anyway, which means not Memorial Day, but early next week,” he said.
The pound fell to a one-month low of 1.23645 against the dollar and was just above that, down 0.19%, after data showed British inflation slowed much less than markets had expected.
The British currency also lost ground against the euro, which was last down 0.25% at 1.1492.
The European Central Bank is set to hike interest rates in June and July as core eurozone services inflation edged up on Tuesday, hurting Sweden’s crown.
The Swedish currency hit 11.541 kronor per euro, its weakest against the common currency since March 2009.
Meanwhile, New Zealand’s dollar slipped after the central bank signaled it was set to tighten after raising rates by 25 basis points in more than 14 years.
The dollar strengthened 0.82% against the crown, while the New Zealand dollar declined 2.29% to 0.61050 against the American currency.
Higher inflation, coupled with higher Bank of England long-term rates, had supported the pound in recent months, but that relationship is now beginning to reverse.
“We are now in the range where if the Bank of England meets market expectations and takes interest rates higher, we are talking about seeing a deterioration of the UK investment outlook and views of financial stability, Which is negative for UK assets,” said Simon Harvey, head of FX analysis at Monex Europe.
Currency Quote Price 12:59 PM (1659 GMT)
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – reuters,