The dollar remains strong as growth concerns persist.haunt markets

Asian Trade TVJuly 4, 2022

0 103 3 minutes read

Reuters reports that on Monday, the dollar kept trade-sensitive currencies near multi-year lows, and investors looking for safety because of worries about slowing global growth put pressure on the euro.

On Friday, data showed that inflation in the eurozone rose to a new record high. This makes it more likely that the European Central Bank will raise interest rates this month.

Even though the euro was flat at $1.0426 on Monday, it was only a few cents above its five-year low of $1.0349 in May. This shows that the market prefers dollars because the future looks bad.

The Australian and New Zealand dollars hit their lowest levels in two years on Friday, and they were still close to those levels during the Asia session. The Aussie was down 0.1% to $0.6809, after hitting a low of $0.6764 on Friday. It stayed at $0.6203. [AUD/]

Before the Fourth of July holiday in the United States, trade is likely to slow down.

When the world economy is weak, safe havens tend to help the dollar, especially at the expense of currencies that are based on exports. This has kept the dollar high, even though fears about growth have made it less likely that the U.S. will raise interest rates.

At 105.120, the U.S. dollar index was close to last month’s 20-year high of 105.790. The much-watched GDP Now forecast from the Atlanta Federal Reserve has dropped to an annualised minus 2.1% for the second quarter. This means that the country was already technically in a recession.

A currency strategist at the Commonwealth Bank of Australia (OTC: CMWAY) in Sydney, Carol Kong, said that the Australian dollar, other commodity currencies, and even the euro and pound are likely to fall even more over the next week. This is because markets are currently very worried about the risk of a sharp slowdown in the global economy.

On Friday, sterling fell to its lowest price in two weeks, at $1.1976. It was last worth $1.2090. [GBP/]

This week, Australia’s central bank will meet on Tuesday. On Wednesday, the minutes from the Federal Reserve meeting last month will be released, and on Friday, the U.S. employment report will be released.

The markets have priced in a 40 basis point (bp) rise in Australian interest rates, so if a rise of that size or close to it happens, it may not do much to help the Aussie.

The minutes from the Fed’s June policy meeting, which will be released on Wednesday, will almost certainly sound hawkish, since the committee decided to raise rates by a huge 75 basis points.

The market thinks there is an 85 percent chance that rates will go up by another 75 basis points this month, putting them at 3.25 percent to 3.5 percent by the end of the year, before they go down in 2023.

On Friday, the dollar kept its gains against three Asian currencies: the Thai baht, the Indonesian rupiah, and the Singapore dollar. This put the dollar at its strongest level in years. [EMRG/FRX]

In the same way, the dollar stayed strong against the Japanese yen, and at the end of the day, it was worth 135.24 yen per dollar.

One exception was the Chinese yuan, which went up to 6.6915 yuan per dollar. China is coming out of its lockdown, and money has been flowing into its stock market. Investors seem to think of it as a safe place to hide from the risks of stagflation in the West. [CNY/]

At 04:57 GMT, bid prices for currencies

Last US Close PercentageYTD Percentage ChangeBid high or low

Before Change

Session

Euro/Dollar

$1.0427 $1.0427 +0.01% +0.00% +1.0444+1.0418

Dollar/Yen

135.0950 135.2700-1.4% +0.00% +135.2950 +134.8100

Euro/Yen

140.87, 140.99 -0.09 % +0.00 % +141.1700 +140.6200

Dollar/Swiss

0.9592 0.9596 +0.00% +0.00% +0.9596 +0.9583