The US dollar is having a difficult time in European markets as it heads towards its possible lowest week in over a year. Traders are currently considering the rates on interests by the Federal Reserve as too high.
As of this morning, the Dollar Index tracking the dollar against 6 other fiat currencies around the world was trading at 0.1% lower than previously at $94.735. The Dollar Index has tumbled by more than 1% this week, facing its biggest weekly percentage decline since last December.
The current selloff of the dollar is coming up in a tedious week when the yearly consumer inflation of the United States is escalating to points that have not been experienced as far back as1980. Many Federal Reserve officers are consequently suggesting that the central bank increase interest rates to combat inflation.
The Vice-Chair of the Federal Reserve, Lael Brainard, is the recent high official to advise swift Federal action to arrest the situation. She made the pronouncement during the hearing of the Senate Banking Committee to confirm her appointment. Brainard said that the United State and the Federal Reserve have what it takes to halt inflation and they were going to deploy them.
USD vs Others
The US dollar traded against the Japanese Yen at 0.4% lower to end up at $113.72, getting as low as $113.64, the lowest since December 2021. The USD rose 0.1% to claim $1.1467 against the Euro to climb its highest height since November, while the USD slide a little lower against the AUD after two months of steady gains.
An analyst at ING has noted that a jump in the American inflation up to 7% was considered by Forex investors as a selling opportunity with a considerable unwinding of dollar longs, thereby causing a general dollar weakness.
He explained further that the little rise in the EUR/USD trade is likely to push more pressure on the dollar at other instances, saying the 1.1500 resistance holding is important for dollar investors as it is.
Meanwhile, the GBP/USD had a 0.1% increase to hit $1.3721. This was made possible because the British economy had a much needed 0.9% growth in November, eventually leading the world’s #5 economic powerhouse the US.
The British Pound has been doing very well despite political instability around Boris Johnson, the Prime Minister when the Bank of England increased interest rates last December. They are also looking at the possibility of another increase as early as February.
The USD fell to the Chinese Yuan by 0.2% after China did a groundbreaking trade surplus in December as their export went beyond expectations during the pandemic.