Dollar Hits Multi-Week Highs as Fed Less Dovish Than Peers

Dollar Hits Multi-Week Highs as Fed Less Dovish Than Peers
Dollar Hits Multi-Week Highs as Fed Less Dovish Than Peers

The US dollar hit a new eight-week high above 159 yen on Friday and held on to a five-week high against the pound, as the Federal Reserve’s patient approach to cutting interest rates interest contrasts with more dovish positions elsewhere.

The dollar index, which measures the currency against six major peers such as the yen, sterling, euro and Swiss franc, rose 0.41% overnight, erasing the week’s declines, after a second cut successive rate hikes at the Swiss National Bank and hints from the Bank of England of a cut in August.

Meanwhile, the yen has remained lower following the Bank of Japan’s decision last week to delay tapering bond-buying stimulus until its July meeting.

As a result, “traders punished the yen with renewed enthusiasm,” driving it above the closely watched level of 159 per dollar on Friday, according to Tony Sycamore, market analyst at IG.

“The Bank of Japan’s calendar is strongly out of sync with the markets, and this mismatch is likely to force it to act to support the yen (through monetary intervention) sooner than it would have needed to,” Sycamore said.

The BOJ, at the behest of Japan’s Finance Ministry, spent some 9.8 trillion yen ($61.64 billion) to lift the currency from a 34-year low of 160.245 per dollar, hit on April 29.

Because of this, the US Treasury on Thursday added Japan to a list of countries it is monitoring for possible labeling as a currency manipulator. China is among others on the list.

Still, Japan’s top currency diplomat, Masato Kanda, stressed Friday that Tokyo is willing to take new “decisive” measures against “speculative and excessive volatility.”

The dollar was last trading 0.04% weaker at 158.875 yen, after previously hitting 159.12.

The US currency was little changed at 0.8909 Swiss francs, after a rise of 0.78% overnight.

The dollar index fell 0.09% to 105.54 and was headed for a flat end to the week, after two consecutive weeks of gains.

The pound rose 0.05% to $1.26635, not far from Thursday’s low of $1.2655, a level last seen on May 17. The Bank of England left rates on hold, but some policymakers said the decision not to cut rates was “finely balanced.”

The euro rose 0.17% to $1.07198, recovering some of Thursday’s 0.39% decline. The European Central Bank began its rate cut cycle at the beginning of the month.

Federal Reserve officials, for their part, left monetary policy unchanged at their June meeting and reduced to one previous forecast of three quarter-point cuts this year, even though inflation has cooled. and the labor market has relaxed.

“The resilience of the US economy has given the Federal Reserve a unique position, allowing the US central bank to use higher interest rates as a tool to combat inflation more quickly than it could otherwise do,” said James Kniveton. , corporate currency expert at Convera.

“With other major central banks adopting more dovish stances, this has the potential to continue supporting the dollar in the short and medium term.” ($1 = 158.9900 yen)

For Latest Updates Follow us on Google News


PREV What is “antifa,” the movement that Trump’s attacker claimed responsibility for? – News
NEXT It is difficult for Biden to win