Por Geoffrey Smith
Investing.com – The dollar stabilized at the start of trading on Wednesday in Europe after falling on Tuesday, as plunging new home sales and falling social media stocks stoked fears of a recession in the United States.
Yields on US Treasuries declined on Tuesday as interest in risky assets surged, illustrating that the market’s focus is shifting from fears of inflation to fears of growth. Consequently, expectations about the path of interest rates in the United States are being lowered, reducing the support they have given to the dollar in recent weeks.
At 9:25 AM ET, the , which tracks this currency against a basket of six other major currencies, stands at 102.14, up 0.2% from Tuesday’s close. It has lost more than 1.7% in the last week, as expectations regarding interest rates have changed in favor of the euro and the , although it continues to accumulate gains of 6.8% so far this year .
The feeling that the dynamics of relative interest rates is changing to the detriment of the dollar has been reinforced when the Reserve Bank of New Zealand has announced a hike in its rates by 50 basis points, to 2%. The bank said that substantial hikes are more likely now to keep inflation from staying high for too long. He rose 0.6% to hit a three-week high of 1.5350 per dollar, before reversing gains a little later.
The same debate — whether further hikes are needed to maintain public faith in central bank commitments to keep inflation low — is also driving the euro right now. ECB President Christine Lagarde said on Tuesday that only “gradual” rate hikes are needed as long as inflation expectations are not de-anchored.
Other members of the ECB’s governing council, such as the Austrian and Dutch central bank governors Robert Holzmann and Klaas Knot, have advocated a 50 basis point hike as early as July, but Finnish central bank chief Olli Rehn A decisive voter on the governing council, he sided with Lagarde on Wednesday, although he has signaled that inflation risks have certainly increased.
In response, he shed 0.5% to the $1.0648 level.
Meanwhile, Russia’s central bank has announced it will hold an emergency meeting this week, amid speculation that the ruble’s rise will lead to further cuts in interest rates and perhaps lifting more capital controls. The BCR raised its as much as 20% and halted almost all foreign exchange purchases from both individuals and companies in an effort to protect the ruble when Russia invaded Ukraine in February.
However, Russia’s huge current account surplus – revenue from energy exports has continued to flow while import purchases have plummeted due to Western sanctions – has meant that the currency is now, if anything, too strong. . It rose another 1.2% on Wednesday to 56.191 per dollar, its highest level in more than four years.
