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The Dollar Holds Firm Near a 4 Month High

The dollar stayed firm against a basket of currencies on Friday. It remained near its highest level in four months, as investors awaited fresh signals from the Federal Reserve on its plans to remove monetary assistance.

Although consumer pricing data published the day before suggested that inflation had peaked, wholesale price data emphasized the strength of inflationary pressure. Thus, supporting the case for the Fed to withdraw some of its assistance.

The dollar index was stable at 92.966. It was not far from the four-month high of 93.195 sets on Wednesday and was up 0.2 percent for the week.

Currency

The euro fell marginally to $1.1732. It was put on track for a second straight week of losses and kept close to the four-month bottom of $1.1706 set on Wednesday.

The dollar traded at 110.42 yen, a touch down from the one-month high of 110.80 on Wednesday. Sterling was trading at $1.3815, down from a two-week low of $1.3794 in the previous session, with little help from June’s slightly higher-than-expected GDP forecast.

The Australian dollar traded at $0.7342 per US dollar, near an eight-month bottom of $0.72895 established last month.

In other news, bitcoin rose 1.1 percent to $44,913. It fell short of Wednesday’s three-month high of $46,787 and giving back most of its gains this week. Meanwhile, Ethereum rose 1.7 percent to $3,095.

The Impact of the Delta Variant

The emphasis is turning away from inflation and toward employment. While we must continue to monitor the impact of the Delta variation, if we see solid payroll growth in the following months, the Fed should announce tapering,” said Naoya Oshikubo, senior economist at Sumitomo Mitsui (NYSE: SMFG) Trust Asset Management.

Some investors believe the Fed may announce tapering timing as soon as August 26-28 at a gathering of central bankers in Jackson Hole, Wyoming. However, many others believe the Fed will adopt a more gradual approach. They still want to talk about and think about it. This is to have us absorb that idea so that it is news when they start doing that, said Christopher Smart.

As the International Energy Agency (IEA) warned that the spread of the Delta strain of the coronavirus would hinder the recovery of global oil demand, falling oil prices put some pressure on commodity-linked currencies.

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