Dollar soars, reaching a nine-month high after Fed meeting
The U.S. dollar came back with some positive news on Thursday. Surprisingly, It rose to a nine-month high after the minutes of the Fed’s last meeting.
The meeting showed that policymakers expected to reduce stimulus measures during the pandemic before the end of the year, as global markets fell into chaos.
The U.S. dollar index measures the overall performance of the U.S. dollar against six currencies. This index continued its gains in early London trading, rising 0.3% to 93.434, the highest level since November 5, 2020.
Additionally, Fed officials generally expect to reduce monthly bond purchases later this year.
Before this, the number of initial jobless claims each week will be announced later in the market, which will confirm the gradual improvement in the U.S. labor market.
Analysts believe that reducing debt purchases is beneficial to the U.S. dollar. They expect it to increase government bond yields and make investors more attractive to holding U.S. dollar-denominated assets.
How are other currencies doing?
The meeting minutes pushed major Wall Street stock indexes down by more than 1% and pushed multiple currencies against the safe-haven U.S. dollar to a multi-week low.
The European market opened stumblingly, and the U.S. stock index futures started weakly.
The euro fell to a low of $1.16655 for the first time since November 4.
After the Federal Reserve meeting minutes, the U.S. dollar also outperformed the yen and the Swiss franc. The U.S. dollar/Swiss franc rose 0.2% to 0.9186, while the dollar’s exchange rate against the yen rose to $110.225.
The Canadian Canadian dollar also hit a 4-week low of $1.2699.
The Philadelphia Fed also schedules releasing Fed’s August manufacturing index on Thursday, which is likely to improve slightly from July.
In other respects, before the latest policy meeting of the People’s Bank of China scheduled to be held early Friday, the exchange rate of the U.S. dollar against the renminbi rose 0.2% to 0.6959, slightly higher than the three-week high.
The People’s Bank of China is likely to maintain the benchmark lending rate unchanged for the 16th consecutive month. However, this view is not universal as there are signs that China’s economic recovery is losing momentum.
