Traders, today is the day, as price hikes boost the dollar! According to the US dollar index, which measures the currency’s strength against other 6 powerful currencies, the greenback hit 0.4% at 101.72 in New York trading this morning. This means it reached nearly a 14-year high, while oil prices dropped as traders were faced with the tough choice between big stock and a potential agreement on an outturn cut, Reuters reports.
The effect? With the USD rising to 101.79 only a few hours ago, which is the highest it got since 11 January. As a chain reaction, Treasury yields were deeply hit by the USD going up about 6 basis points at 2.420% following a daily growth of 2.426%, which marks a booming rise since 22 February.
Economists are expecting US interest rates to jump in March, following an ascending trend after William Dudley, NY Fed President stated that “the case for monetary policy tightening has become a lot more compelling“.
Trump was very brief in his speech to the Congress about his plans for infrastructure expenditure and tax reform. However, what the US president did say was that he was open to reform the US immigration system, while pledging significant tax relief for the middle class, but did not delve more into the matter. Could this strengthen the dollar? Possibly. Analysts seem to keep their hopes high after the president’s speech, although he gave little to no details about the economic policies.
Meanwhile, on the other side of the pond, in Europe, the euro dropped by 0.3% to as little as $1.0686. By comparison, little changes were observed in the movement of the Japanese yen (1 JPY = 109.09 per 1 USD), with an earlier drop to 109.75. The USD went up as much as an 8-year high against the Chinese yuan ( 1 USD = 6.8798 CNY) and continues to rise.
Considering these swift ups and downs going on in the market but especially the almost overnight hike of the greenback, Mazen Issa, New York TD Securities’ senior currency strategist did not hesitate to show his concern “The market has gone a bit too far ahead of itself. It looks vulnerable for a short-term pullback,” Reuters notes.
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