U.S. Dollar Appreciates On Early Fed Rate Hike Hopes
January 06 2022 - 2:51AM
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The U.S. dollar moved up against its most major counterparts in
the European session on Thursday, buoyed by a spike in treasury
yields, as expectations for a rate hike in March intensified
following the release of the minutes from the Federal Reserve's
monetary policy meeting in December.
The benchmark yield on the 10-year note touched 1.71 percent,
its highest level since March 2021. Yields move inversely to bond
prices.
The minutes showed that the central bank is prepared for earlier
and faster rate hikes in the wake of an improvement in the labour
market and elevated inflation pressures.
"Participants generally noted that, given their individual
outlooks for the economy, the labor market, and inflation, it may
become warranted to increase the federal funds rate sooner or at a
faster pace than participants had earlier anticipated," the minutes
stated.
Policy makers also agreed to accelerate tapering of bond
purchases and end it in March.
According to the CME Group's FedWatch Tool, investors are
pricing in a 71.4% probability of a 25 basis point rate hike in
March.
Investors now await U.S. nonfarm payrolls due on Friday for more
direction.
Nonfarm payrolls are expected to rise by 400,000 jobs in
December, with the unemployment rate falling to 4.1 percent from
4.2 percent.
The greenback was up at a 2-day high of 1.3490 against the pound
and a 3-day high of 0.9200 against the franc, off its previous lows
of 1.3559 and 0.9155, respectively. Next likely resistance for the
greenback is seen around 1.32 against the pound and 0.94 against
the franc.
The greenback gained to 1.1285 against the euro, but it has
since eased to 1.1327. The pair was worth 1.1312 at Wednesday's
close.
Reversing from its prior lows of 0.7223 against the aussie,
0.6796 against the kiwi and 1.2749 against the loonie, the
greenback firmed to a fresh 2-week high of 0.7146, more than 2-week
high of 0.6734 and an 8-day high of 1.2814, respectively. The
greenback may face resistance around 0.70 against the aussie, 0.66
against the kiwi and 1.30 against the loonie.
The greenback, however, fell to 115.66 against the yen as the
latter got a lift amid safe-haven demand. If the greenback slides
further, 112.00 is possibly seen as its next support level.
Looking ahead, German preliminary CPI for December is scheduled
for release at 8:00 am ET.
U.S. weekly jobless claims for the week ended January 1, ISM
non-manufacturing PMI for December, factory orders for November and
U.S. and Canadian trade data for the same month will be released in
the New York session.
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