The dollar hit a two-month high against the euro and a six-month high against the yen on Thursday after traders cut bets on a rate cut this year after a resilient U.S. economy.
Paradoxically, the dollar will also benefit from safe-haven demand as the stalled US debt ceiling threatens a catastrophic default even on June 1, when the Treasury Department warns it will not be able to pay in full. is recieving. The dollar touched $1.07425 to the euro for the first time since March 24 in early Asian trading, rising to $1.0748 in final trading. The dollar was also bought to 139.66 yen, the level on November 30th.
With just a week to go until the debt ceiling’s “X date” and a split Congress taking days to pass the bill, investors are getting more nervous. Fitch on Wednesday put the US’ ‘AAA’ rating on negative watch, heightening the sense of imminent danger.
“The dollar is showing solid gains, and for good reason,” said IG Markets analyst Tony Sycamore, especially amid growing signs of a debt ceiling stalemate and a slowdown in China’s economy. pointed out the aftermath of demand. and Europe. “The dollar could rise another 2% and we believe Fitch could be the trigger.”
The US dollar index against six major currencies including the euro and the yen hit a two-month high of 104.01. Sycamore said the index test could go to 106 if it consistently beats 104.
The latest signs of weakness in Europe stemmed from a worse-than-expected deterioration in German business confidence. Meanwhile, the Chinese yuan fell to 7.0827 to the dollar in offshore markets, hitting a six-month low.
The Asian giant has released a flurry of disappointing economic data, all pointing to a slowdown in consumer demand and suggesting the post-pandemic recovery has already come full circle. there is The Australian dollar has felt the effects of China’s bearishness seriously due to its close trade ties, hitting a six-and-a-half-month low of $0.6527.
The New Zealand dollar remains reeling from the central bank’s shocking dovish tilt on Wednesday, which sent it down 2.2%. It climbed to $0.6085 on Thursday, its lowest since mid-November. Expectations for a rate cut this year are just a quarter of a quarter off their previous maximum of 75 basis points in December, as the U.S. economy shows resilience in the face of aggressive Fed tightening. dropped to 1 point.
With consumer inflation still hovering around double its 2% target, money markets fell another quarter in June following recent hawkish stances from some Fed officials. It raised the probability of a point rate hike again to about one-third. Fed Governor Christopher Waller said Wednesday at an event in California that “whether we should raise rates or skip the June meeting will depend on what the statistics look like over the next three weeks.”
“Unless we have clear evidence that inflation is falling towards our 2% target, we will not support a moratorium on rate hikes,” he said.
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