Dollar gains in early trade after Fed announces rate increases

15 Jun 2023 , 11:53 AM

After the Federal Reserve hinted at rate increases later in the year, the U.S. dollar strengthened in Asian trading on Thursday, while the currencies of China and New Zealand declined due to indications of weakness in those economies.

The market is now focusing on later this week’s decisions by other central banks.

After the Fed left interest rates stable but indicated that borrowing costs might rise by another 50 basis points (bps) by the end of December, the dollar index increased 0.28% to 103.21, recovering from a four-week low of 102.66 on Wednesday.

The markets anticipate a 25 basis-point increase on Thursday and another in July before taking a break for the remainder of the year when the European Central Bank publishes its next rate decision.

Following on Friday is the Bank of Japan, which is anticipated to keep its ultra-dovish posture and yield curve management settings.

The euro dropped 0.12% to $1.0818 but gained 0.35% to 152.26 yen when compared to the yen of Japan.

Along with the dollar, the yen declined, dropping 0.46% to $140.735.

Data revealed that New Zealand’s economy contracted into a technical recession in the first quarter, sending the kiwi dollar down 0.68% to $0.6170.

After the People’s Bank of China (PBOC) reduced the borrowing cost of its medium-term policy loans for the first time in 10 months, the Chinese yuan fell 0.1% and reached 7.1872 per dollar, its lowest level since November.

That came after the PBOC’s short-term policy lending rate was lowered on Tuesday.

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