Economy

Dollar Reaches a Two-Decade High, Nervous Investors Seek Refuge

Dollar Reaches a Two-Decade High: Concerns that stronger monetary policies to combat rising inflation will harm the global economy dampened risk sentiment and sent investors into the safe-haven currency on Thursday, sending the dollar to new two-decade highs.

Wednesday’s data reveals…

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The dollar index, which measures the strength of the greenback against a basket of six currencies, climbed 0.4 percent to 104.44, the highest level since December 2002.

Consumer price rise in the United States dropped substantially in April, indicating that inflation had likely peaked, albeit it was expected to remain high.

Dollar Reaches a Two-Decade High

The dollar benefited as the data reaffirmed predictions for more aggressive interest rate hikes by the Federal Reserve, and investors were concerned that central bank tightening might hinder global development.

Concerns that stricter monetary measures to manage growing inflation might harm the global economy dampened risk sentiment and propelled investors into the safe-haven currency, driving the dollar to new two-decade highs on Thursday (May 12).

Consumer price rise in the United States dropped substantially in April, indicating that inflation had likely peaked, albeit it was expected to remain high.

The dollar benefited as the data reaffirmed predictions for more aggressive interest rate hikes by the Federal Reserve, and investors were concerned that central bank tightening might hinder global development.

Asian equities sank to a two-year low, European stocks plummeted, and oil prices dropped 2%.

The dollar index, which measures the strength of the greenback against a basket of six currencies, climbed 0.4 percent to 104.44, its best level since December 2002.

Despite growing expectations for a rate hike in July, the euro remained under pressure due to concerns that the Ukraine conflict and rising energy prices could push the eurozone into recession later this year.

“The market had already priced this in, but we can now have high confidence that the ECB will raise in July,” MUFG strategists said.

After hitting a low of US$1.044 in January 2017, the euro slid 0.5 percent to US$1.0463.

The negative news about China’s COVID-19 issue dampened risk sentiment even more, according to Mizuho strategists.

In Shanghai, two additional infections have been recorded, delaying the end of the lockdown.

Shanghai authorities searched the city on Thursday for the city’s final COVID-19 cases, paving the path for the city’s excruciating six-week lockdown to end. The yuan dropped to 6.8150 per dollar, its lowest level since September 2020, and was last down 0.7 percent at 6.8125.

As hawkish Federal Reserve rhetoric continued to weigh on the Japanese currency, the yen climbed 1% against the dollar, although it was still close to its lowest level since April 2002.

A Bank of Japan policymaker dismissed the idea of using interest rate hikes to fight severe yen declines, saying it was improper to adjust monetary policy to manage exchange rates.

Meanwhile, Bitcoin sank to its lowest level in 16 months on Thursday, prompting a flight from risk assets like tech stocks, while the collapse of TerraUSD, a so-called stable coin, highlighted the strain on cryptocurrency markets.

Bitcoin, the world’s most valuable cryptocurrency, fell 3% to US$27,584, its lowest level since December 2020. In the last eight sessions, it has lost a third of its worth.

Source: channelnewsasia.com

The Heartz Team.

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