Currency Buzz: Dollar Index At 2- Year Peak

13 Apr 2022 , 03:42 PM

The US dollar bounced back in the European session, underpinned by the prospect of a more aggressive pace of Federal Reserve tightening. The dollar index, that measures the greenback against a basket of currencies broke above 100.5 for the first time since May 2020 and is currently seen quoting at 100.36. Meanwhile, the benchmark 10-year U.S. Treasury yield traded at 2.765% early Wednesday, compared with an over-three-year peak of 2.836% before the inflation data. U.S. consumer price index rose 8.5% in March compared with a year ago, the highest rate since 1981, boosted by the soaring cost of gasoline. However, the core CPI, which excludes volatile energy and food prices, fell short of estimates, landing at 6.5%. This raised the possibility that the Federal Reserve might not need to be as aggressive in the second half of this year as some had originally expected. However, Fed Governor Brainards said that despite the welcoming signs of cooling in US consumer price inflation, the central bank was still determined to substantially shrink its asset sheet and raise interest rates several times. These remarks reassured investors that the Fed would continue to pursue what the FOMC minutes had recently shown.

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