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As U.S. rates decline amid recessionary threats, the dollar declines

Image: Reuters Berita 24 English - As U.S. rates fell, the dollar lost some of its lustre against the majority of its key competitors on Wed...


Image: Reuters

Berita 24 English - As U.S. rates fell, the dollar lost some of its lustre against the majority of its key competitors on Wednesday. Investors were considering the possibility of a recession as a result of the Federal Reserve's aggressive rate hikes.


The dollar index, which compares the value of the dollar to six other currencies, declined 0.08 percent to 104.39, giving up some of its 0.53 percent overnight gain that was primarily driven by the euro's loss.



As Asian shares fell along with Wall Street, Treasury 10-year rates decreased by more than 1 basis point in Tokyo, trading at about 3.17 percent. U.S. shares declined after a sharp decline in consumer confidence in the country fueled concerns about a slowdown as the Fed hurried to control inflation.



After falling to $1.05025 on Tuesday, the euro increased 0.11 percent to reach $1.05315, as European Central Bank (ECB) President Christine Lagarde provided no new information regarding the direction of European interest rates at the ECB's annual symposium.



Although experts disagree on the size of any increase, it is widely anticipated that the ECB would follow the lead of its worldwide counterparts and increase interest rates in July for the first time in ten years in an effort to curb runaway inflation.



Later on Wednesday, Lagarde and Fed Chair Jerome Powell will participate in a panel discussion at the forum.



In a client note, Westpac analysts predicted that the dollar index will remain in the 101 to 105 area for the time being, adding that "recession risk may undercut DXY periodically (but) the larger medium-term uptrend likely persists a while yet."



The DXY is not anticipated to peak until closer to the end of the Fed's front-loaded tightening cycle, they continued.



The dollar decreased by 0.8% to 136.04 yen, while pound increased by 0.16 to $1.2204.



The risk-sensitive Australian and New Zealand dollars staged modest recoveries from Tuesday's declines versus the US dollar, with the Australian dollar up 0.07 percent and the New Zealand currency up 0.18 percent. This was in spite of the decline in stocks.

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