King Dollar dominates, hits fresh 16-month high as inflation heats up

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King Dollar dominates, hits fresh 16-month high as inflation heats up

On Tuesday, in late-afternoon Asia-Pacific trading hours, the US Dollar Index (DXY) measured against a basket of six major currencies on an average has been trading almost unchanged at 95.40, holding on to its yesterday’s gains, as a sharp shoot-up in inflation indicators alongside hopes of a hawkish US Federal Reserve stance in a near term had prompted FX traders to jump on the bandwagon of a US Dollar buying-frenzy.

Apart from that, as the US President Joe Biden had signed off an ‘once-in-a-generation’ $1-trillion infrastructure bill into a law, investors’ optimism over a stronger US economic growth seemingly had multiplied, while a fresh influx of capital into the financial system would more likely to fan up inflation indicators further, which would eventually press the US Fed to hike borrowing costs earlier-than-anticipated while rekindling a safe-haven appetite for the greenback.

Nonetheless, it remains to be seen whether another trillion-dollar jab into the US economy, mostly built up on the back of a record budget deficit alongside a soaring inflation with surging costs leaving barely anything to save for common Americans, could keep lighting up the greenback.

On a political viewpoint, with President Biden’s popularity having plunged horrendously despite an unspeakable scale of backing from US media, keeping capital markets alongside US Dollar afloat by injecting baskets of “white-papers,” often glorified as stimulus, on a continuous basis even in the expense of the Americans’ blood-money, appeared to be the only way to prevent Republicans from dominating the US Congress in mid-term election, suggested analysts.

US Dollar clings on to 16-month peak

Citing statistics, as of Tuesday’s late-afternoon Asia-Pacific trading hour, the US Dollar Index (DXY) remained unchanged at a 16-month peak of 95.40 after jumping 0.3 per cent on Monday.

Besides, the greenback shed 0.10 per cent against the bloc’s common currency euro to $1.1378, while British Pound added 0.05 per cent to $1.3419. Nonetheless analysts suggested that the US Fed could drown euro up to $1.10 by end-2022.

Australian Dollar eased 0.07 per cent to $0.7340 and the kiwis shed 0.11 per cent to $0.7036, while safe-haven Japanese Yen fell 0.05 per cent to 114.18 yen per Dollar and Swiss Franc was trading flatlined at $0.9249.