Hong Kong (Reuters) – On Monday, the dollar was close to a 20-year high against its rivals. Investors were looking for safety because they were worried about global growth, which was made clear by bad Chinese economic data, which caused the Australian dollar to fall.
After going up for six straight weeks, the dollar index was at 104.57. It briefly went over 105 on Friday, which was its highest level since December 2002.
In a report updating its currency projections, HSBC global FX research said that the USD will stay stronger for a longer time because of ongoing geopolitical tensions, global supply disruptions, a slowing Chinese economy, and a “hawkish” Federal Reserve.
They anticipate that the euro will reach parity with the dollar within the next year. “The ECB has one of the most difficult policy problems among the G10 central banks because its GDP is much lower and inflation is much higher,” they said.
The value of the single currency was $1.0395 on Monday morning, somewhat lower and barely above the $1.0354 level it reached on Thursday, its lowest level since the beginning of 2017.
The Australian dollar fell 0.68 percent as a result of weaker-than-expected Chinese data for April.COVID-19 lockdowns weighed heavily on consumption, industrial output, and employment, increasing expectations of a rapid downturn in the second quarter.
Sim Moh Siong, a currency analyst at the Bank of Singapore, said, “I believe people want to see more action taken to stabilize the Chinese economy, so this is something to watch for.”
Investors are also waiting for more information from the Federal Reserve about where interest rates will go in the future. According to him, the conflict between Russia and Ukraine could hurt the growth of the European economy.
According to CME’s Fedwatch tool, the markets are pricing in 50 basis point raises at the Fed’s next two meetings, with the chance of bigger increases.
“In view of the uncertainties surrounding inflation, the Fed cannot provide any more advice, but they are willing to provide reassuring words to rule out a 75 basis point rate rise,” said Sim.
The British pound, which has suffered against the euro, was trading at $1.2244 on Monday, having fallen to as low as $1.2156 the previous week due to weaker-than-anticipated first-quarter GDP numbers.
In the next week, Britain will provide statistics on the labor economy, inflation, and consumer sentiment.
The Japanese currency strengthened to 129 yen per dollar. Last week, after hitting a low of 131.35, it went up for the first time since early March.
Since rates in Japan are capped, the yen is vulnerable to rising U.S. yields. However, worries about global growth have stopped U.S. Treasury yields from going up.
Cryptocurrency markets, which are open 24 hours a day, enjoyed a calm weekend following last week’s upheaval, which was caused by the so-called stable coin TerraUSD breaking its dollar peg.
Bitcoin was trading at $30,300, down 3% from its low of $25,400 on Thursday, its lowest level since December 2020.