Dollar consolidates as investors prepare for an increase in rates that lasts longer

23 Feb 2023 , 08:24 AM

In light of the Federal Reserve’s last policy meeting minutes and market expectations that it will continue on its aggressive rate-hike path, the dollar rose versus the euro and the Australian dollar on Thursday, approaching a seven-week high.

The FOMC meeting minutes from the Jan. 31–Feb. 1 meeting showed on Wednesday that nearly all Fed policymakers supported slowing the rate of interest rate increases.

Nevertheless, they also said the ‘key consideration’ in determining how much further rates need to rise would be to stop inflation from getting too high.

The dollar stopped rising after initially rising significantly in response to the news.

On Thursday, the euro made a slight advance to $1.0608, but it remained stuck close to the almost seven-week low of $1.0598 reached the previous day.

In a similar vein, the Australian dollar increased 0.15% to $0.6815 after losing more than 0.7% on Wednesday due to lower-than-expected Australian wage growth in the previous quarter.

Sterling was steady at $1.2046 after falling by 0.6% in the prior session, and the New Zealand dollar increased by 0.1% to $0.6226.

The Reserve Bank of New Zealand’s aggressive rate increase on Wednesday, which came after the institution hinted at upcoming tightening measures to control excessive inflation, helped the kiwi maintain some of its gains.

The U.S. dollar index was at 104.50 against a basket of currencies and was seeking to surpass last week’s more than one-month high of 104.67.

With attention now focused on the statements of incoming Bank of Japan (BOJ) Governor Kazuo Ueda, the Japanese yen crept up in Asia to 134.83 to the dollar.

On Friday and the following Monday, Ueda will address the legislature; he might provide some hints as to when the BOJ would abandon its policy of controlling bond yields.

For feedback and suggestions, write to us at [e-mail]