The Dollar Loomed Huge Over Weak Financial Markets
On Tuesday, the dollar loomed big over weak financial markets, with investors concerned about rising interest rates, global growth, and geopolitical concerns. At the same time, the yen tested levels that have triggered official intervention.
The yen fell to $145.81 per dollar overnight. That was just 10 points below a 24-year low three weeks ago when the Japanese government intervened. Japan closed at 145,652 yen on Tuesday.
Strong US labor data and the anticipation that inflation readings on Thursday would remain stubbornly high have crushed bets on anything other than high-interest rates until 2023, propelling the dollar back to multi-decade highs.
Russia fired missiles at a Ukrainian city on Monday in response to an explosion that damaged the only bridge connecting Russia to the occupied Crimean peninsula. This sent the market into a downward spiral.
The risk-sensitive Australian dollar fell to a 20-year low of $0.6275 on Monday after settling at $0.6296 early Tuesday. Analysts at National Australia Bank said the Australian dollar was the “whip” of the market during the sell-off. As sentiment is weak, further depressions are likely shortly.
Currencies
The New Zealand currency hit a 212-year low of $0.5545 on Monday and is on the verge of shattering its pandemic trough, with negative news from China further dampening sentiment.
The dollar index rose by 0.0523% to 113.122 points. That’s not much different from last month’s 20-year high of 114,781. UK markets remained volatile despite increased bond buying by the Bank of England and Finance Minister Kwasi Kwarteng’s promise of some tax announcements.
Treasuries fell overnight, and sterling fell to a 10-day low of $1.1027 on Monday. The pound rose 0.279 percent to $11,190 on Tuesday. On Monday, September 26, the pound was only $1,035. This level was the closest to the pound’s dollar equivalent.
Since then, the pound has strengthened slightly, but some traders believe that the currencies will eventually equalize and that the pound may even trade below the $1 threshold.
The pound has gradually declined versus the dollar during the last 70 years, occasionally collapsing.
