The United States Dollar gained against safe-haven currencies on Wednesday after the Federal Reserve committee announced it has approved plans to speed up pandemic stimulus withdrawal process.
The Dollar Index rose to a three-week high of 96.87 on Wednesday before dropping to 96.14 on Thursday during the London trading session.
However, against the Japanese Yen, a known haven currency, US Dollar sustained its gain at 114.153, up from 113.52 on Tuesday. But the greenback failed to keep its gain against the Swiss Franc after hitting 0.92940 on Wednesday. It drops to 0.92318.
This was after the US Federal Reserve maintained interest rates at 0 to 0.25 percent to achieve maximum employment despite the surge in inflation to a four-decade high.
The Committee, however, agreed to reduce monthly stimulus purchases by $20 billion for treasure securities and $10 billion for agency mortgage-backed securities.
“Beginning in January, the Committee will increase its holdings of Treasury securities by at least $40 billion per month and of agency mortgage‑backed securities by at least $20 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.
“The Federal Reserve’s ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.”
U.S Dollar Pares Losses Against Safe Haven Yen on Wednesday
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.
U.S Dollar Jumps to Three Weeks High on Better Than Expected Retail Sales
The United States Dollar rose to a three-week high after data from the Commerce Department showed that the U.S retail sales rebounded in the month of August despite falling consumer confidence.
The US Dollar Index rose to 93.40 on Monday to extend Friday breakout above the 93.00 key resistance level.
U.S retail sales jumped to its highest in five months in the month of August to beat 0.8 percent decline predicted by experts. Retail sales grew by 0.7 percent in August to increase the odds of the US Federal Reserve announcing tapering during next week’s Federal Open Market Committee (FOMC) meeting.
“U.S. consumption is not slowing as quickly as it appeared a month ago despite the fading stimulus, and the Delta variant did not much affect the industries feeding into retail sales,” said Chris Low, chief economist at FHN Financial in New York. “The economy continued to hum in August.”
Against the Japanese Yen, the U.S dollar strengthened to 109.48 from 109.91 attained on Friday on broad-based selloff during London trading session, while heavy selloff plunged British pound against the U.S dollar 1.36610 before reboundling slightly to 1.36946.
The Euro dropped from 1.17883 recorded on Friday to 1.16995 on Monday during London trading session.
Dollar Drops to One Week Low on Monday After U.S Consumer Sentiment Plunges to Lowest in 10 Years
The United States Dollar declined to a week-low against most currencies on Monday after dropping the most in seven weeks on Friday after a report showed U.S consumer sentiment dropped to the lowest since 2011 amid rising COVID-19 infections.
The dollar index, which tracks the greenback against six counterparts, changed slightly at 92.528, still maintaining a 0.50 percent decline posted at the end of last week.
However, the U.S Dollar dipped to 109.455 against the Japanese yen on Monday, its lowest since August 5, 2021. Against the euro common currency, the dollar was largely flat at $1.17960, near a week low of $1.18045 it closed on Friday.
“Does the survey signal an imminent turn in the U.S. economy? We doubt it given vaccine efficacy remains high and the hit to sentiment likely means more people will get vaccinated,” Tapas Strickland, an analyst at National Australia Bank, wrote in a client note. “Instead, the Delta surge in the U.S. is more a case of delay rather than derail as far as the recovery is concerned.”
Against the Nigerian Naira, the U.S Dollar traded exchanged at N515 on Monday at the parallel market popularly known as the black market. At the bureau de change section, the U.S. dollar was sold at N513 and N410.11 by the Central Bank of Nigeria.
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