US Dollar hovers at fresh one-year high as rate-hike, taper prospects rise



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US Dollar hovers at fresh one-year high as rate-hike, taper prospects rise

The US Dollar Index (DXY) measured against a basket of six major currencies on an average had flared up to a 12-month peak, mostly buoyed up over prospects of an earlier-than-anticipated tapering in US Federal Reserve’s bond repurchase alongside a rate-hike as early as by mid- to late-2022, while as of Thursday’s late Asia-Pacific trading hours, American Dollar Index appears to be extending its latest run of blowout rally with the greenback’s safe-haven bid flying higher on the cloud nine.

Apart from that, since last week’s US Fed policy meet that had underscored an upscaled significance of a near-term tapering of the US Fed’s $120 billion in monthly bond repurchase program, US Dollar had been witnessing a blistering rally along with US Treasury Yields, as risk-appetites had hit a stumbling block amid a steep downward spiral in market participants’ morale over a plausible global-scale economic slowdown alongside an uptick in delta cases.

On top of that, investors became Panglossian over a plausible tapering of fiscal support as early as by November this year alongside a rate-hike by mid- to late-2022 after US Treasury’s Yellen had said yesterday that the US Government would run out of cash by October 18 unless the US Fed could lift up its debt-ceiling cap.

US Dollar jumps to a fresh 12-month peak

Citing statistics, on Wednesday’s FX market wind-down, the US Dollar Index measured against a basket of six major currencies on an average spanned its recent winning streak into a fourth straight session in a row, gaining as much as 0.7 per cent to 94.40, the highest since late-September 2020, as analysts have been expecting 2.0 to 3.0 per cent further upswing in the Index on a technical viewpoint.

Safe-haven Japanese Yen, in tandem, dipped to an 18-month low against its American counterpart, tumbling by 0.4 per cent to 111.99 yen per Dollar, the lowest since late-February 2020, while Swiss Franc lost 0.7 per cent to $0.9351 against its American peer, the weakest in five months.

Besides, the bloc’s common-currency euro, shared among 19 eurozone member states, had been dealt with a hefty blow of 0.77 per cent to $$1.1593, as British Pound plummeted 0.88 per cent to $1.3419 against the greenback.

Meanwhile, addressing to a growing bet on a tapering of fiscal support in a near-term alongside a rate-hike as early as by November this year, a CBA strategist Kimberley Mundy said, “We are expecting USD strength to continue for the remainder of the year...and that's just because of the outlook for policy tightening”.