U.S. dollar hit a new high. What about Euro and Sterling?

Dollar firm as growth risks dominate

The dollar was solid on Monday as traders braced for a big increase in US interest rates this week and sought safety as data pointed to a faltering global economy.

The dollar was marginally higher than most major currencies early in the Asian session, trading at $1.0195 on the euro and 136.57 Japanese yen.

The Federal Reserve of the United States concludes a two-day meeting on Wednesday, and markets are pricing in a 75-basis-point (bp) rate hike, with a 9 percent probability of a 100-bp boost.

The release of GDP statistics in the United States is also scheduled for Thursday. Still, markets have already been unsettled by a barrage of weak business indicators in Europe, which snuffed out a rise in risk assets on Friday.

The euro, the official currency of 19 of the 27 European Union countries, has been losing value in recent months and reached parity with the US dollar on July 13 for the first time since 2002. Parity denotes a 1:1 exchange rate between the two currencies.

Despite a minor rebound from the multi-decade low, Americans were still getting a roughly 13% discount from a year ago as of Tuesday’s market closing.

Currencies

The euro is also beleaguered by an energy crisis, while the trade-sensitive Australian and New Zealand dollars, which hit one-month highs on Friday, have retreated.

The Australian dollar fell nearly 0.5 percent to $0.6892, while the New Zealand dollar fell by the same amount to $0.6223.

The release of Australian consumer pricing data on Wednesday is expected to provide support by increasing betting for rate hikes. However, economists warn that the backdrop is generally negative.

Sterling also fell on Monday, despite market expectations that the Bank of England will raise interest rates by 50 basis points next week. It was down 0.3 percent to $1.1970 at the time of writing.

Bitcoin was trading at $22.278. The dollar increased by 0.4 percent to 0.9641 Swiss francs. The US dollar index was 106.840, slightly below a two-decade high of 109.290 in mid-July.

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