In the lead-up to their important Jackson Hole symposium, Federal Reserve officials proceeded to stress the necessity for additional interest rate increases, pushing the U.S. dollar to a new one-month high versus major rivals on Friday.
The dollar index increased 0.14% to 107.63 from its previous high of 107.72, reached on July 18. This week, the gauge is expected to increase by 1.86%, which would be its highest weekly result since June 12.
The dollar increased to 136.38 yen, its highest level since July 28, and is expected to increase by 1.99% weekly, its best performance since June 10.
In the meantime, the euro fell to $1.0070, its lowest level since July 15. As of July 21, $1.1895 was the lowest price for sterling.
James Bullard, president of the St. Louis Federal Reserve, indicated that he is inclined to support a third consecutive 75-basis-point increase in interest rates in September, while Mary Daly, a colleague at the San Francisco Federal Reserve, suggested that a rise of 50 or 75 basis points would be appropriate.
Esther George, president of the Kansas City Fed, stated that she and her colleagues would continue to tighten policy until they were sure that the excessive inflation was beginning to decline.
The head of the currency strategy, Ray Attrill at National Australia Bank in Sydney, stated in a client note that the dollar is moving higher as central bank leaders all made plain that the Fed still has work to do hiking rates, even though they disagreed on the exact amount.
Even while the case for further depreciation on comparable (global) economic considerations has been glaringly evident for weeks, it is difficult to attribute weakness in the European currency to specific news.
Since last Friday, the euro has lost 1.73%, which would be the most since July 8. The expected 1.85% reduction in the value of the pound will be its worst weekly decline since May 6.
Investors’ worries about the possibility of a recession prevented renewed inflation fears from giving European currencies a boost and instead pushed regional central banks to continue tightening monetary policy.
Isabel Schnabel, a board member of the European Central Bank, increased concerns about inflation overnight by claiming that consumer prices could yet rise quickly. British prices rise above 10%, according to figures released on Wednesday.
Despite the Fed’s repeated calls for higher rates, the probability of a further huge 75 basis point increase next month has decreased to 40% in the money markets.
However, the degree of tightening will probably be influenced by the consumer price inflation or jobs figures for August, which are due before the Fed’s meeting held in September.
The annual Jackson Hole conference, which takes place from August 25 to 27, will give Fed Chair Jerome Powell the chance to update the markets on his viewpoints.
The Australian dollar dropped to $0.6888 in other places, its lowest level since August 5. At $0.62285, the New Zealand dollar fell to its lowest level since August 5.
Following the central bank’s much-weakened midpoint guidance, the value of the Chinese yuan fell to a three-month low against the dollar in onshore trading, with traders anticipating additional declines because of a slowing economy.
The USD/CNY fix today went above 6.80, the highest level this year, and it indicates that the PBOC won’t stop making gains despite the rising USD, RBC Capital Markets strategist Alvin Tan reported.
In terms of cryptocurrencies, bitcoin dropped 1.67% reaching $22,814, on track to see its biggest weekly decline since July 3 (6.22%). Ether was down 1.54% hitting $1,818.60 and was on track for a 6.02% weekly loss, which would be the worst since the beginning of last month.
