Dollar muscles up, global equities jump after Fed flags taper 'soon'

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Dollar muscles up, global equities jump after Fed flags taper 'soon'

On Wednesday, the American Dollar Index measured against a basket of six major currencies on an average rose 0.26 per cent shortly after the release of US Federal Reserve policy statement that said the US Central Bank would begin to taper its monthly bond repurchase program soon, while nine out of eighteen Fed policymakers had forecasted a rate-hike as early as by mid-2022, eventually offsetting market angsts over Chinese property developer Evergrande that in effect had helped improve risk appetites.

Aside from that, the US Fed Chair Jerome Powell, who had repeatedly stressed that a latest uptick in inflation indicators would be shortlived, had said in a press conference shortly after the Fed policy statement that the US Central Bank might wrap up tapering of fiscal support by mid-2022, much earlier than a prior forecast of end-2022.

On top of that, US Federal Reserve had kept its benchmark borrowing cost unchanged between 0.0 per cent to 0.25 per cent, however, a majority of Fed policymakers had forecasted a rate-hike to 1 per cent by 2022, while interest rates could be further raised to 1.8 per cent in 2023 with aims to keep inflation indicators marginally above the US Fed’s target of 2.0 per cent.

Overall, US Fed’s decision to taper its fiscal support for economy had added to a bullish breeze while spurring up risk-appetites, faring well for both US Dollar and global equity indices.

Dollar rises, global equity indices end higher after Fed decision to taper stimulus

Citing statistics, Wall St.’s main indices closed more than 1 per cent higher and the regional pan-European STOXX 600 climbed 0.99 per cent.

while MSCI’s gauge of global equity indices that keeps track of 49 stock exchanges across the globe gained 0.73 per cent. In the FX market, the US Dollar index gained 0.26 per cent, while the bloc’s common currency euro shed 0.27 per cent to $1.1691 against its American counterpart and safe-haven Japanese Yen shed 0.50 per cent to 109.78 Yen per Dollar.