The dollar value went down today morning in Asia, but still, it managed to remain near the middle of the latest range. All the investors are now waiting to hear from Jerome Powell’s Senate Banking Committee of the U.S. Federal Reserve Reserve for any type of clues on the speed as well as the timetable of policy normalization.
By 10:13 p.m. ET, the U.S. Dollar Index, which measures the value of the dollar against a basket of other currencies, had fallen 0.12% to 95.875 points (3:13 AM GMT). The USD/JPY exchange rate rose 0.12% to 115.34. The AUD/USD pair rose 0.31 percent to 0.7190 after data showed that Australian retail sales increased by 7.3 percent month on month, above expectations, while the trade balance was AUD9.423 billion in November. The NZD/USD exchange rate increased by 0.21 percent to 0.6769. The USD/CNY exchange rate fell 0.06 percent to 6.3722, while the GBP/USD exchange rate increased 0.12 percent to 1.3591.
At the beginning of his remarks, Powell said that high inflation must be prevented from becoming entrenched. However, we did not get any clues about the timeline of the central bank as well as the speed of monetary tightening. Powell is again bidding for his second term at Fed’s helm and will answer questions from senators at the time of the hearing. The hearing for Fed vice chair nominee Lael Brainard will be organized on Thursday. Not only this but lo Esther George, the Fed President of Kansas City, as well as St. Louis Fed President James Bullard, will speak on the same day. According to TD Securities analysts, the Fed was thinking “sooner rather than later” for both higher rates and running down its balance sheet after discontinuing bond-buying stimulus.
The note further added that dollar strength should be supported by a confirmation of March 2022 tightening and early quantitative tightening but within well-established parameters. However, the TD security analysts are expecting a hike in June 2022. The money market, on the other hand, is priced for the hike in interest rate by May 2021, along with an additional two by November.
Investors are now waiting for data from the United States, with the consumer price index and the Fed Beige Book expected on Wednesday, followed by the producer price index the next day. On Wednesday, China will announce its own consumer and producer pricing indices.
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