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U.S Dollar Pares Losses Against Safe Haven Yen on Wednesday

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The United States Dollar rebounded slightly from a three-day low recorded against major peers since the Federal Reserve announced tapering without plans to raise interest rates in spite of the inflation rate hitting 5.4 percent in the month of September.

The U.S dollar after trading near one month low against the Japanese Yen in the early hours of Wednesday rebounded from 112.76 to 113.15 at the time of writing. Widely regarded as safe haven, investors normally jump on Yen during a period of high uncertainty to curb risk exposure.

The dollar index, which measures the greenback against six major currencies, was largely unchanged at 93.997 after declining gradually from more than a one-year high of 94.634 it reached on Friday.

The Euro common currency was little changed at $1.1565, sustaining its three-day gain against the greenback.

Experts are predicting that a further increase in Consumer Price Index, which measures inflation, in October could force the Fed to raise interest rates than previously anticipated. Economists polled by Reuters are predicting 0.4 percent for CPI in October, up from 0.2 percent in September.

Still, We’ll need to see a print of 0.8% month-on-month to see the dollar index break out of the top of the range of 94.50,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, wrote in a client note.

Although the dollar has been trending lower against the yen, “if U.S. CPI comes in hot then this poses a risk to USDJPY shorts,” he wrote.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Dollar

Dollar Attains Parity With Euro on Tuesday

The United States Dollar (USD) exchange rate to European common currency (Euro) was the exact same in the early hours of Tuesday for the first time in 20 years.

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US Dollar - Investorsking.com

The United States Dollar (USD) exchange rate to European common currency (Euro) was the exact same in the early hours of Tuesday for the first time in 20 years.

The Euro-USD exchange rate opened at 1.003 on Tuesday and dropped to 0.999 before moderating to 1.0036 at the time of writing.

The slowing global economy amid rising interest rates has made the United States Dollar attractive to global investors who were looking to avoid the negative impact of the projected economic recession and ensure they have in their possession operating capital for possible re-entry at lower price levels or to avoid the impact of persistent increase in borrowing costs (interest rates) in the near-term.

As shown below, the Euro-USD pair started declining on February 10, 2022 when the United States announced that Russia was planning to invade Ukraine.

The invasion, which eventually happened on February 24, has disrupted the global economy, bolstered commodity prices, and increased global risks and uncertainties. In an effort to rein in the high inflation rate, economies started raising interest rates in a move to curb escalating inflation rates.

These aggressive increases have started dragging on new investments, new job creation, consumer spending, retail sales and export orders. And financial experts are now predicting it could get worse with Russian sanctions.

Western nations are working on imposing additional oil sanctions on Russia. This, JP Morgan predicted could push oil prices above $350 a barrel and further complicate the global economy.

All the aforementioned are responsible for the increase in dollar strength against Euro and other global currencies to over 20 years high.

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U.S. Dollar Pulls Back on Thursday After Hitting a 20-Year High

The United States Dollar pulled back slightly on Thursday after hitting a 20-year high on the back of rising interest rates and global demand for haven currencies.

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U.S dollar - Investors King

The United States Dollar pulled back slightly on Thursday after hitting a 20-year high on the back of rising interest rates and global demand for haven currencies.

The dollar index rose to 107.05 in the previous session, the highest in 20 years before pulling back to 106.57 at 11:07 am Nigerian time.

Against the Euro common currency, the U.S. Dollar gave back some of its gains on Thursday to trade at 1.0213, up from 1.0173 attained after dropping below 1.0350 support levels.

Similarly, the greenback pared gains against the British Pound to 1.2009 despite over 40 British lawmakers resigning their positions and calling for the resignation of Prime Minister Boris Johnson enmeshed in a series of scandals.

The value of the United States Dollar rose in recent weeks after it became clear that the Federal Reserve won’t be halting its rate increase anytime soon. The surge in demand for the United States Dollar was to avoid paying excessive borrowing costs going forward and also to ensure cash availability going into recession, known cash is king.

The Federal Reserve is expected to raise borrowing costs by another 50 basis points to 75 basis points in the month of July as it continues to battle 40 years high inflation rate of 8.6%.

This persistent increase in borrowing costs is expected to weigh on new job creation, new investment, earnings, and subsequently, drag on consumer spending that over the years has sustained the world’s largest economy.

Overseas orders will start waning American goods become more expensive to holders of foreign currencies. This, Investors King predicted would hurt manufacturing activity.

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United States Dollar Drops to a Week-Low After Rates Decision

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US Dollar - Investorsking.com

The United States Dollar dropped to a week low against its global counterparts on Wednesday after the Federal Reserve raised interest rates by 0.25% against the widely expected 0.75%.

The move came as a surprise to financial market operators for one reason, the U.S. inflation is at a record-high of 8.5%. However, the Fed highlighted rising global risks and uncertainties due to the ongoing COVID-19 restrictions in China and the Russia Ukraine war.

This, the central bank explains necessitates caution.

“The market was pricing in essentially a 50/50 chance that you see a 75 basis point hike by July, between June and July, and so I think the most important takeaway here that I think the market was really fixated on, was whether or not a 75 basis point hike is on the table, and he (Powell) basically pushed back on that,” said Mazen Issa, senior fx strategist at TD Securities in New York.

The United States dollar index declined to $102.48 from $103.64 it peaked on Wednesday immediately the Fed made its decision.

Against the Euro common currency, the United States dollar lost 0.82% to $1.0622. While against the Pounds Sterling and Yen, the green back dropped to $1.2625 and $129.12, respectively.

Stocks and other risky assets rose after Fed suggested it could curb inflation without necessarily triggering a recession.

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