On Tuesday, the US Dollar Index (DXY) measured against a basket of six major currencies rose 0.46 per cent to 93.74, marking up its third straight day of gains after Chicago Fed President Charles Evans had stoked a hawkish tone and raised the prospects of a higher interest rate despite previous FOMC minutes’ pledge not to hike its benchmark overnight lending rate at least until end-2021.
In point of fact, speaking in a virtual meet at the London-based Official Monetary and Financial Institutions Forum, Chicago Fed’s Evans was quoted saying that the US economy would unlikely to avert the passage of a longer and slower recovery unless further Federal stimulus adding the Federal Reserve policymakers might be required to discuss their new average inflation target, while they could start raising the rates before reaching an average inflation target of 2 per cent since further quantitative easing might not proffer an uplift for a recessed US economy.
In factuality, it was Evans’ hawkish tone on Tuesday which had guided the US Dollar to report a third straight session of gain, while the euro fell to a two-month trough against its American peer before paring some of its losses in late-afternoon trading and the safe-haven Swiss Franc fell to a seven-week low.
Apart from that, the British currency had been hovering around a two-month low against its American counterpart, as a re-imposition of the pandemic restrictions alongside the possibilities of a no-deal Brexit had been weighing on the British currency.
Dollar gains after Fed's Evans’ upbeat remarks
Citing statistics, the greenback surged 0.5 per cent against the bloc’s common currency euro to $1.1708, while the safe-haven Japanese yen fell for the second straight session in a row since the US Dollar had wrapped up the day 0.26 per cent higher to 104.92 Yen per Dollar.
Meanwhile, referring to the upbeat remarks from Chicago Fed’s Evans, who has been set to become a voter in the policy-setting Federal Open Market Committee next year, a macro strategist at Wells Fargo Securities in New York, Eric Nelson said on the day’s FX market closure, “All we’ve been hearing from the Fed for the last few months is we’re not going to hike rates at any point in the foreseeable future. Then Evans came in and challenged that narrative, so the market got caught off-guard. ”