The dollar soared to a nine-month high against its main counterparts on Thursday, as investors expect the Federal Reserve to begin reducing its massive stimulus program this year.
The dollar index, which compares the US currency to six rivals, reached 93.502, its highest level since November 5, before closing 0.26 percent higher at 93.464.
The euro fell to $1.16655 for the first time since November 4, while the Australian dollar fell to $0.7198, the lowest since November 5, and the New Zealand dollar fell to $0.68465, the lowest since November 13.
The US dollar reached a high of 110.225 yen.
Federal Open Market Committee
The minutes of the Federal Open Market Committee’s July 27-28 meeting, released on Wednesday, indicated that the Fed might ease bond-buying stimulus this year if the economy continues to improve as expected. It is worth remembering that the FOMC’s July meeting occurred before the blockbuster July non-farm payrolls data, stated Joseph Capurso, a strategist at Commonwealth Bank of Australia (OTC: CMWAY). We remain confident that the FOMC will unveil a tapering program in September, with implementation beginning in October or maybe November.
A decrease in debt purchases is usually favorable for the currency because the Fed will not be flooding the financial system with as much money.
The annual Jackson Hole, Wyoming symposium, which runs from August 26 to 28, is now the focal point for Fed watchers.
Our take is that Fed policymakers will continue to signal continuous steps toward policy normalization, providing the USD with critical ongoing underlying support, Westpac strategists wrote in a client note.
The Reserve Bank of New Zealand
On Wednesday, the kiwi fell in value when the Reserve Bank of New Zealand delayed becoming the first G10 central bank to boost interest rates during the epidemic. A day after, a new outbreak brought the country to a halt. RBNZ Governor Adrian Orr told parliament on Thursday that the official cash rate will gradually rise to a more neutral level over the next 18 months.
The number of COVID-19 cases in New Zealand increased to 21 on Thursday.
Despite a severe lockdown, Australia’s New South Wales state, home to Sydney, recorded record infections for a second day on Thursday.
The dramatic reduction in the country’s unemployment rate to a 12-year low of 4.6 percent in July only boosted the Aussie for a short time, with the data clouded by coronavirus limitations that caused some people to leave the labor field.
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