On Tuesday, the US Dollar Index (DXY) measured against a basket of six major currencies on an average dipped 0.16 per cent to 92.43, as investors appeared to be awaiting further clues from this week’s US Federal Reserve policy meet on any signals when the Central Bank might begin to taper fiscal supports for the economy.
More importantly, a month earlier, minutes from May US Fed policy meets had revealed that 11 of 18 US Federal Reserve policymakers had been witnessing a rate-hike as early as by late-2022, while bullish comments from Fed’s Bullard alongside US Treasury’s Yellen had led to analysts’ belief that the US Federal Reserve might not be able to withstand a latest uprising in the inflation indicators.
On top of that, US Consumer Prices Index (CPI), a critical inflation indicator, had soared to 5.4 per cent in June, while the US Federal Reserve’s key inflation gauge, core PCE index (Personal Consumption Expenditure) had already topped the US Central Bank’s target of 3.0 per cent on May, heightening up prospects that the US Central Bank might begin to taper its monthly $120 billion bond repurchase program as early as by August this year.
However, despite such chaotic outlook for the American currency with a rising inflationary pressure, the US Dollar had been rising sharply for more than a month over optimism of a solid economic rebound, but a hawkish Fed stance would likely to reverse the broader landscape, suggested analysts.
US Dollar edges lower ahead of US Federal Reserve policy meet outcome
Citing statistics, in the day’s FX market wind down, the US Dollar fell 0.12 per cent to $1.1817 against the bloc’s common currency euro, shared among 19 eurozone member states, while the British Pound gained 0.44 per cent to $1.3879 against its American peer.
Aside from that, the safe-haven Japanese Yen surged 0.54 per cent to 109.78 yen per Dollar, while another safe-haven asset Swiss Franc rose 0.14 per cent to $0.9144 against its American counterpart. Meanwhile, citing the likelihoods of a downward spiral in US Dollar in a near term outlook, a senior market analyst at Western Union Business Solutions, Joe Manimbo said, “The dollar has had a nice summer surge and I think the event risk that the Fed poses has been enough for dollar bulls to take some chips off the table”.
Still, the US Dollar Index (DXY) remained closer to its 3-1/2 month high of 93.19 reached on July 21.