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

Dollar Falls from 20-Year High

The dollar was nearly 1% lower against major rivals at the start of a week that will witness a dozen central bank decisions, led by the Federal Reserve on Wednesday.

The Dollar Index measures the dollar against six other currencies. It rose by 0.09% on Friday at 109.66. Beforehand it had an eventful few weeks when it reached 110.69 on Sept. 7; first time since mid-2002. It fell to 107.57 six days later.

Economic statistics have swayed investors. It suggests the Fed might pause the pace of rate hikes to lessen the economic impact and risk of recession, only to see inflation rise.

Policymakers emphasized that they will make choices based on the most recent facts. The market expects a gain of at least 75 basis points ahead of this week’s FOMC meeting.

There are also several market holidays this week in Japan, the UK, and Australia. It could reduce liquidity and lead to stronger price movements.

The euro, pound, and pro-cyclical currencies such as the Australian dollar will remain under pressure due to the weak economic outlook.

The dollar was barely changed at 143.905 yen, reaching a 24-year high of 143.99 earlier this month.

The BOJ will likely maintain enormous stimulus, distinguishing itself from developed-nation central banks that are all fast-tightening policies to manage inflation.

At the same time, the BOJ recently omitted the word “temporary” from its definition of consumer price rises. However, the level is far lower than in locations like the United States and the United Kingdom.

Currencies

The New Zealand dollar was steady at $0.5899. It fell to its lowest level since May 2020 at $0.5960 after last week. Sterling fell to a 37-year low of $1.1251 on Friday; but was steady at $1.1436. Markets are unsure whether the BoE will hike interest rates by 50 or 75 bps on Thursday.

The austerity policy is at odds with Treasury Secretary Kwasi Kwarteng’s micro-budget. It should provide more information on aid to help reduce the cost of living in the country.

The euro was almost unchanged at $1.00075. It extended the week of consolidation that began on September 6th when it fluctuated between a 20-year low of $0.9864 and a high of $1.0198 nearly a month ago.

The AUD changed a little at $0.67535.

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