Image: Reuters Berita 24 English - The U.S. dollar continued to be under pressure on Thursday as it appeared to continue losing ground vers...
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| Image: Reuters |
Berita 24 English - The U.S. dollar continued to be under pressure on Thursday as it appeared to continue losing ground versus key rivals for a fourth day. This was exacerbated by Treasury yields that were languishing near two-week lows amid growing recession fears.
The dollar index, which compares the value of the dollar to six important rivals, decreased by 0.1 percent to 104.12, marking a 0.46 percent fall since Friday. From the two-decade top of 105.79 hit on June 15 when the Federal Reserve hiked rates by 75 basis points, the largest increase since 1994, it has dropped 1.56 percent.
Markets are growing more apprehensive that the Fed's efforts to cool off raging inflation may trigger a downturn. These concerns caused the 10-year Treasury yields to drop to a level that was over two weeks low.
The Federal Reserve is firmly committed to keeping prices in check, even if doing so increases the danger of an economic downturn, Fed Chair Jerome Powell stated in testimony to Congress yesterday. In response to concerns on the financial markets that the Fed's tightening rate will stifle growth, he said a recession was "definitely a possibility."
Reuters polled economists, who predicted another 75 basis point increase for July and a 50 basis point increase for September.
In a client note, Westpac analysts stated that "Powell's semi-annual statement has taken some wind out of the USD, his comments suggesting higher recession risk apparently weighing more than his unwavering pledge to restore price stability."
"However, USD interest rate support should eventually continue to develop, with 75bp still on the table for July and Fed Funds set to reach beyond 3 percent by year's end."
Westpac advises purchasing at those levels despite the near-term possibility of a drop in the dollar index to the level of 102.
The dollar dropped from a 24-year high of 136.71 set on Wednesday to a new low of 135.97 yen.
The U.S. dollar, however, increased in value relative to the South Korean won, reaching 1,302.77 for the first time in 13 years and closing the day 0.19 percent higher at 1,300 won.
While pound fell 0.2 percent to $0.8630, the euro barely changed at $1,05615 per unit.
