Image: Reuters Berita 24 English - In a shift away from riskier assets that also saw a stock market surge peter out, investors resorted to ...
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| Image: Reuters |
Berita 24 English - In a shift away from riskier assets that also saw a stock market surge peter out, investors resorted to the safe haven dollar on Wednesday. Additionally, data revealed that British consumer price inflation hit a fresh 40-year high.
The U.S. dollar advanced against most rivals as investors started to become uneasy once more about prospects for global growth. As rising U.S. and European bond yields contrasted with low Japanese interest rates, the yen fell to a new 24-year low.
After British consumer prices increased to 9.1% last month, the highest pace among the Group of Seven countries, underscoring the depth of the cost-of-living squeeze, the pound fell 0.8 percent to $1.2198, its lowest level in in a week.
As real earnings in Britain are already being squeezed by rising prices, Mike Bell, global market strategist at J.P. Morgan Asset Management, stated that raising borrowing costs further "may feel like rubbing salt in the wound" and increases the danger of a recession. But he anticipated that the Bank of England would continue hiking rates to combat inflation until it became obvious that the labour market was weakening.
He declared, "The Bank of England (is) caught between a rock and a hard place."
The commencement of U.S. Federal Reserve Chair Jerome Powell's two-day testimony before Congress is the other major event on Wednesday. Investors will be watching for additional cues on whether another rate hike of 75 basis points is likely at the Fed's July meeting.
At 104.8, the dollar index had increased by 0.33 percent. To $1.0497, the euro decreased by 0.4%.
After hitting 136.71 in early trading, its lowest level since October 1998, the yen was last sliding 0.3 percent lower at 136.3 per dollar.
Analysts do not expect the sell-off, which has caused the yen to fall 18% this year from 115.08 at the end of 2021, to cease anytime soon.
The yen has been declining as a result of the strain that rising energy prices are having on Japan's current account as well as the widening yield differential between Japanese and U.S. Treasury bonds.
The yield on the 10-year Japanese government bond is effectively capped at 0.25 percent thanks to the Bank of Japan's policy of yield curve control (YCC), which it committed to uphold last week.
According to Redmond Wong, market strategist at Saxo Markets Hong Kong, "Dollar/yen is still trading on Treasury rates, which have been consistent but with the 10-year holding above the 3.20 percent barrier while the Bank of Japan has done a lot to defend YCC."
Currency of commodities Low commodity prices also weighed, with the Australian dollar down 1.1 percent to $0.6898 and the Norwegian crown falling 1.3 percent to 9.9740 against the US dollar.
