As Asia woke up on Wednesday, the dollar was up. This is because central banks around the world are likely to tighten their policies to slow inflation.
The US Dollar Index, which measures the value of the dollar against a basket of other currencies, was up 0.28 percent at 102.60 (4:24 AM GMT) at 12:23 p.m. ET.
The USD/JPY pair went up 0.4% to 133.12. After falling to a 20-year low, the yen kept falling because the Bank of Japan (BOJ) hasn’t shown any sign that it will stop its ultra-easy monetary policies.
But Japan’s economy seems to be getting better. Japan’s gross domestic product (GDP) fell by 0.5% year-on-year from January to March, according to data released by the government earlier in the day. This is less than the initial reading of a 1% drop that came out last month.
“Yield spreads continue to favour the U.S. dollar, and USD/JPY broke above 132,” said City Index senior market analyst and Reuters contributor Matt Simpson.
“It is clear that the BOJ would rather keep control of the yield curve than have a weaker currency,” he said. “The February 2002 high at 135 is the next important line in the sand.”
The Australian dollar fell 0.33 percent to 0.7204, while the New Zealand dollar fell 0.39 percent to 0.6464.The Reserve Bank of Australia (RBA) surprised everyone by raising rates by a surprising amount on Tuesday. It raised interest rates to 0.85%, which was more than what Investing.com had predicted, which was 0.60.
The GBP/USD pair fell 0.16 percent to 1.2568, while the USD/CNY pair increased 0.04 percent to 6.6737.
The yields on 10-year U.S. bonds stayed below 3%.
The European Central Bank (ECB) will meet on Thursday and announce its policy decision.Most people think that this will set the stage for more interest rate hikes.
Janet Yellen, the U.S. Treasury Secretary, said on Tuesday that she thought inflation would stay high. In its budget proposal, the Biden administration is expected to raise the 4.7 percent inflation forecast for this year.
The outlook for the world economy stayed bad. Due to rising commodity prices, supply problems, and moves by central banks to raise interest rates, the World Bank cut its estimate for global growth this year from 4.1% in January to 2.9% now. Investors are now waiting for the U.S. consumer price index (CPI) report on Friday to find out more about how the U.S. Federal Reserve will raise interest rates.
“With quantitative tightening replacing quantitative easing and 100 basis point Fed rate hikes coming this summer, you buy bonds and sell the dollar at your own risk,” Societe Generale strategist Kit Juckes told Reuters.
