The dollar continued to lose ground on Wednesday as investors anticipated additional clues about when U.S. interest rates will peak. Attention again shifted to incoming inflation data.Federal Reserve policymakers said this week that the bank was nearing the top of its cycle of rate hikes. As a result, there were substantial capital outflows from the …
The dollar continued to lose ground on Wednesday as investors anticipated additional clues about when U.S. interest rates will peak. Attention again shifted to incoming inflation data.
Federal Reserve policymakers said this week that the bank was nearing the top of its cycle of rate hikes. As a result, there were substantial capital outflows from the dollar and into assets with higher levels of risk amid speculations that the currency had peaked. The dollar index and dollar index futures both fell by 0.3% to a two-month low continued to lose ground overnight into the Asian session. In spite of a run of dismal economic indicators, the Japanese yen increased by 0.6% to a level close to one month high against the dollar, while the Australian dollar increased by 0.5%. For the day, the two had the top performances in the area. The rate-sensitive South Korean won increased by 0.1% as attention shifted to this week’s Bank of Korea meeting. In contrast, the Indian rupee increased by 0.2% in anticipation of local consumer price index (CPI) inflation data that is scheduled to be released later in the day.
Following a string of effective daily midpoint fixes by the People’s Bank of China, the Chinese yuan gained 0.3% on Wednesday, reaching a three-week high against the dollar. The Chinese economy’s prospects are also looking better, according to reports in official media that Beijing is preparing more stimulus measures to support the economy’s sluggish post-COVID recovery. With respect to the dollar, the Chinese yuan had fallen to six-month lows in June. The majority of market attention was focused on the upcoming U.S. CPI data, which is anticipated to reveal that overall inflation fell in June. Core CPI, though, is predicted to have stayed sticky, which would prompt the Fed to raise interest rates again soon.
While Fed officials claimed that the peak in U.S. interest rates was nearly reached, they all agreed that additional rate increases were necessary in the near future to combat sticky inflation. Rate increases of 25 basis points are anticipated from the Fed at its meeting in late July.
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