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The dollar rose to a nine-month high against its major peers on Thursday, on expectations that the Federal Reserve will start tapering its huge stimulus this year.
The dollar index, which measures the U.S. currency against six rivals, climbed as high as 93.502, its strongest since Nov. 5, before trading 0.26% higher at 93.464.
The euro fell as low as $1.16655 for the first time since Nov. 4, while the Aussie sank to $0.7198, a level not seen since Nov. 5, and the kiwi slid to $0.68465, the weakest since Nov. 13.
The greenback rose as high as 110.225 yen.
In minutes of the Federal Open Market Committee‘s July 27-28 meeting released on Wednesday, Fed officials saw the potential to ease bond-buying stimulus this year if the economy continues to improve as expected, although the condition of “substantial further progress” toward maximum employment had not yet been met.
“It is worth remembering the FOMC’s July meeting took place before the bumper July non-farm payrolls report,” Joseph Capurso, a strategist at Commonwealth Bank of Australia, wrote in a research note.
“We retain our call the FOMC will announce a tapering in September followed by implementation in October or possibly November.”
A reduction in debt purchases is typically positive for the dollar as the Fed will not be flooding the financial system with as much cash.
The focus for Fed watchers now is the annual Jackson Hole, Wyoming symposium, which runs Aug. 26 to 28.
“Our read is that Fed officials will continue to signal ongoing steps toward normalising policy, providing the USD with crucial ongoing underlying support,” Westpac strategists wrote in a client note.
“The AUD remains in a powerful four-month downtrend,” and may drop to $0.70, while the New Zealand dollar eyes a drop to $0.68, although it should rise later in the year, they wrote.
The kiwi lost support on Wednesday after the Reserve Bank of New Zealand delayed becoming the first G10 central bank to raise interest rates during the pandemic, a day after a new outbreak thrust the nation into lockdown.
On Thursday, RBNZ Governor Adrian Orr told parliament he still sees the official cash rate gradually increasing towards a more neutral level over the next 18 months.
New Zealand’s COVID-19 cases jumped to 21 on Thursday, although authorities said the virus may not have been in the community for long as they linked its origin to a recent returnee from Sydney.
Australia’s New South Wales state, home to Sydney, reported record infections for a second day on Thursday, despite a strict lockdown.
An unexpected drop in the country’s unemployment rate to a 12-year low of 4.6% in July only lifted the Aussie briefly, with the data muddied by coronavirus restrictions spurring some people to drop out of the workforce.
Sterling touched a four-week low of $1.3712. Canada‘s loonie also reached a four-week low of C$1.2699 per greenback.
China’s yuan slid to a three-week low in offshore trading of 6.4996 per dollar.
========================================================
Currency bid prices at 0420 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar
$1.1678 $1.1709 -0.27% -4.42% +1.1716 +1.1666
Dollar/Yen
110.1450 109.7800 +0.34% +6.65% +110.2250 +109.7900
Euro/Yen
128.63 128.51 +0.09% +1.35% +128.7000 +128.4800
Dollar/Swiss
0.9197 0.9172 +0.31% +3.98% +0.9207 +0.9179
Sterling/Dollar
1.3722 1.3752 -0.23% +0.43% +1.3757 +1.3712
Dollar/Canadian
1.2688 1.2664 +0.20% -0.35% +1.2698 +1.2649
Aussie/Dollar
0.7204 0.7234 -0.41% -6.35% +0.7243 +0.7198
NZ
Dollar/Dollar 0.6854 0.6885 -0.44% -4.54% +0.6888 +0.6847
All spots
Tokyo spots
Europe spots
Volatilities
Tokyo Forex market info from BOJ
(Reporting by Kevin Buckland; Editing by Sam Holmes and William Mallard)
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
©2024 Bloomberg L.P.
The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
Author of the article:
Published Apr 18, 2024 • 2 minute read
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
Article content
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
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Article content
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
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Article content
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
Article content
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