The US dollar hit a six-week high against a basket of currencies on Friday as traders ramp up bets that the US Federal Reserve would hike rates higher than previously anticipated, and hold them there for longer, as it battles still-high inflation while the employment picture also remains strong.
Two Federal Reserve officials on Thursday said the US central bank likely should have lifted interest rates more than it did early this month and warned that additional hikes in borrowing costs are essential to lower inflation back to desired levels.
Major banks are also raising their rate hike forecasts.
Photo: AFP
Goldman Sachs Group Inc said it was expecting the Fed to hike rates three more times this year, by one-quarter of a percentage point each time, after data this week pointed to persistent inflation and resilience in the labor market.
“Right now the markets are having a major reset with Fed rate hike expectations,” Oanda Corp senior market analyst Edward Moya said. “It seems this current wave of inflation is proving to be troubling for policymakers everywhere and we could start to see monetary policy globally become much more restrictive.”
US data on Thursday showed monthly producer prices increasing by the most in seven months last month, as the cost of energy products surged, while the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
Concerns about the effects of higher rates on the economy is also weighing on risk sentiment, giving a further boost to the US currency.
“We’re starting to see risk aversion take over, and that’s also triggering some safe-haven flows for the dollar,” Moya said.
The dollar index rose 0.02 percent to 103.88, after earlier reaching 104.67, the highest since Jan. 6.
The New Taiwan dollar yesterday fell 0.02 percent to NT$30.410 against the US dollar. Turnover totaled US$79 million during the trading session. The NT dollar was down 0.9 percent from last week’s NT$30.136.
The euro rose 0.22 percent to US$1.0696, after earlier falling to US$1.06125, the lowest since Jan. 6.
European Central Bank (ECB) officials have also made clear that they expect euro zone rates to keep rising.
“There is a risk that inflation proves to be more persistent than is currently priced by financial markets,” German ECB executive board member Isabel Schnabel told Bloomberg on Friday.
The dollar gained 0.12 percent against the yen to ￥134.1, after reaching ￥135.12 earlier, the highest since Dec. 20.
Sterling rose 0.46 percent to US$1.2043, after earlier falling to US$1.19150, its lowest since Jan. 6. Data on Friday showed that British consumers unexpectedly increased their shopping last month.
Additional reporting by staff writer, with CNA
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS