© Reuters.
Por Geoffrey Smith
Investing.com – The dollar hits a high this year at the start of trading on Thursday in Europe, after the Federal Reserve press conference led many to expect more monetary policy tightening than expected. .
Fed Chairman Jerome Powell dodged a question about whether the Fed would raise interest rates at successive meetings this year, leaving open the possibility of more than three hikes by the end of 2022. He also confirmed that the first hike will be in March. , as expected.
“The committee has opted to raise the fed funds rate at the March meeting, assuming conditions are right to do so,” Powell said, adding that “the economy no longer needs substantial injections of monetary policy support.” . Short-term interest rate futures now carry a 20% risk that the first hike will be 50 basis points, rather than 25 basis points, while US Treasury yields, highly sensitive to movements in interest rates, have registered two-year highs at 1.20%.
At 9:00 AM ET, the {{Dollar Index}}, which tracks the currency against a basket of six other major currencies, is up 0.5% to trade at 96.83, and its biggest gains were against higher-yielding currencies such as the and the . He was also down 0.5% to CAD 1.2725 after the Bank of Canada decided to leave interest rates unchanged on Wednesday, although it signaled its first rate hike would not be long in coming.
The has fallen below $1.12 for the first time since November, though it has since recovered some of its losses to settle at $1.1199, while the also shed 0.4% to $1.3413. .
This is the lowest level recorded by the British pound this year, although the British currency has been supported by expectations that the Bank of England will raise its reference interest rates for the second time at its meeting next week.
Analysts at ING (AS:) say they expect the dollar to remain firm ahead of the next Fed meeting in March.
“This will likely be the key debate in currency markets these coming months: whether to simply seek dollar strength against lower-yielding rivals or buy dollars against everything else,” Chris Turner and Francesco Pesole of ING wrote in a note to “Although we recognize that we are going through a sticky period for risk assets, we believe it is too early to conclude that the Fed’s tightening or high energy prices are going to severely stifle global growth this year and we would prefer the first dollar strengthening scenario against lower yielding rivals”.
Everything indicates that the South African central bank will raise its interest rates this Thursday by 25 basis points, to 4.0%, while Chile’s raised them on Wednesday by 150 basis points, to 5.5%.
The dollar’s strength will be put to the test at 2:30 p.m. ET with the release of fourth-quarter US data, while weekly data for – which has risen in the last two weeks due to the wave of the Omicron variant of Covid-19- will be published at the same time.
