The era of the strong dollar is over
2023.01.13 10:11
The era of the strong dollar is over
By Tiffany Smith
Budrigannews.com – After data showed that U.S. inflation was falling, bets that the Federal Reserve would be less aggressive with rate hikes in the future were made, and the dollar fell to a nearly nine-month low against the euro on Thursday.
According to a report, the Bank of Japan may take additional measures to address the side effects of monetary easing. As a result, the Japanese yen surged against the United States dollar, reaching a record high of more than six months.
The consumer price index (CPI) in the United States fell by 0.1% last month, marking the first decline in data since May 2020, when the economy was still recovering from the first COVID-19 outbreak.
The fastest monetary policy tightening cycle since the 1980s by the U.S. central bank is easing supply chain bottlenecks and reducing price pressures.
Sal Guatieri, senior economist at BMO Capital Markets, stated, “Three months of relatively lighter core inflation figures are starting to form a trend… one that could spur the Fed to slow the pace of tightening further on February 1.”
Although they signaled that the central bank’s target rate was still likely to rise above 5% and remain there for some time despite market bets to the contrary, Fed policymakers expressed relief that price pressures were easing, paving the way for a possible slowdown in interest rate hikes.
The dollar fell against the euro by as much as 1% following the CPI report, making it its weakest against the common currency since April 21.
Four officials from the European Central Bank on Wednesday called for additional rate increases, which has supported the euro.
Chris Turner, global head of markets at ING in London, stated, “Our expectations are for another 125 basis points of rate hikes from the ECB and stay there until 2024.”
“Throughout the year, our core views for Fed policy versus ECB policy would be for a stronger euro-dollar.”
At 3 p.m. EST (2000 GMT), the dollar was down 0.83 percent against the euro, or $1.0845, and 0.56 percent against the pound, or $1.22195.
The was at its lowest point since June 6 at 102.20, down 0.815 percent.
The dollar fell as much as 2.7% against the yen, reaching a six-and-a-half-month low against the Japanese yen.
A Yomiuri report that the Bank of Japan (BOJ) will examine the side effects of its monetary easing at its policy meeting next week and may take additional measures to correct yield curve distortions helped boost the yen.
The announcement comes after the BOJ made a surprise change to its bond yield curve control (YCC) in December, but the change did not address the market distortions caused by the central bank’s massive bond buying.
Mazen Issa, senior FX strategist at TD Securities, stated, “With reports that the BOJ will review its lax monetary policy settings at its upcoming meeting, speculation has grown that another YCC shift will occur this quarter.”
He stated that this will most likely occur at the BOJ meeting in January, and if not, by March.
Regarding the dollar-yen currency pair, he stated, “We expect 122 this quarter and likely in short order.”
At 129.35 yen per dollar, the dollar was down 2.41 percent against the yen at the time.
The was up 0.92 percent to $0.69695, and the was up 0.52 percent to $0.63995.
On the basis of optimism that China’s economy is on the path to recovery, it was at its highest level in five months, 6.7331 yuan, against the United States dollar.
Meanwhile, bitcoin rose for the fifth day in a row to $18,863, its highest level in a month.
More Price of Bitcoin is approaching 20 000
