The U.S. Dollar Index Records Gains

Shares on world stock markets fell to their lowest level today in three weeks after the U.S. Federal Reserve (FED) shocked investors by announcing that they could raise interest rates much earlier than expected. This caused a sharp rise in the dollar and bond yields. The dollar recorded the largest one-day rise in the last 15 months after the Fed session, while the yield on the reference 10-year U.S. securities jumped the most since the beginning of March.

The fall in stock prices was somewhat milder, with moderate losses on Wall Street. The broadest index of Asia-Pacific shares MSCI, excluding Japanese, reached the lowest level since the end of May. Therefore, moving in the afternoon trading in Asian time by minus 0.5 percent.

According to a chart illustrating the expectations of individual members of the Fed’s Open Market Operations Committee (FOMC), 13 of the body’s 18 members anticipate an increase in the reference interest rate in 2023 from only six in the past while seven even expect the first such step. It could have happened as early as 2022.

While these expectations do not mean that this will necessarily happen, this sudden turn in the opinions of FOMC members has completely surprised market actors.

In addition, the Fed additionally poured salt on the wound. It signaled that it will now consider at every meeting whether to reduce the purchase of bonds. It bore in mind that the risks of a pandemic are declining due to the progress of vaccination.

Yields on U.S. government 10-year bonds rose nearly nine basis points to 1.57 percent.

The dollar also soared from a recent narrow trading range. It jumped 0.9 percent against a basket of rival currencies to 91,387 points on Wednesday, its biggest gain since March last year.
As for movements in other markets, bond and dollar yield growth dealt a double blow to gold, which fell to $ 1,815 an ounce after falling 2.5 percent overnight.