On Wednesday, the US Dollar Index (DXY) measured against a basket of six major currencies on an average had sharply bounced back from a two-year low, as traders appeared to have capitalized on an opportunistic window that opened up after Wednesday’s FOMC minutes, while a majority of US Fed policymakers had expressed cautious optimisms over a quick recovery of the US economy, though the Fed Chair Powell had warned that a ward off of the Government pandemic stimulus program would heighten up the risks of a slower-than-anticipated economic recovery.
Besides, Wednesday’s torrential rally of the American currency was almost entirely galvanized by the remarks of some of the Fed policymakers, while the US Fed’s July 28-29 meet published on Wednesday had revealed that the US Central Bank had been brewing off potential tweaks to monetary policy.
In tandem, Fed’s warning of a slowdown in economic recovery due to a pause in pandemic stimulus program which in effect had spurred up optimisms of a large-scale stimulus bill in a near-term outlook, had also aided in the US Dollar’s cause.
Nonetheless, the gains were curbed by Fed policymakers’ concern that a path towards economy recovery would likely to face off a flurry of headwinds.
Dollar gains as traders expect more dovish Fed
Citing statistics, on Wednesday’s FX market closure, the US Dollar Index (DXY) measured against a basket of six major rivals, wrapped up the day 0.84 per cent higher to 92.97 after hitting an intra-session high of 93.05.
However, the US Dollar Index tumbled to as low as 92.12 a day earlier, diving to its weakest level since May 2018. Apart from that, the greenback rose 0.77 per cent against the bloc’s common currency euro to $1.1838 and the British currency pummelled 1.07 per cent to $1.3096 against its American counterpart, while safe-haven Japanese Yen closed the day 0.67 per cent lower to 106.11 yen per US Dollar.
Another safe-haven Swiss Franc in tandem was tottered as much as 1.22 per cent to $0.9146. Meanwhile, adding that the US Dollar rally on Wednesday had reflected investors’ disappointment who had been looking to an even more dour projection from the US Federal Reserve, a Vice President of dealing and trading at Tempus Inc., John Doyle said, “There were some in the market that thought the Fed would be even more dovish overall.
And I think that is the one thing that caused stocks to sell off in the aftermath, and the dollar to gain. I think that these minutes in a vacuum wouldn’t be enough to cause that move, but that because of where we are at a technical level were seen as a reason to take profits. ”