© Reuters. File photo: In this illustration taken on May 7, 2021, a one-dollar bill can be seen in front of the displayed stock chart. REUTERS/Dado Ruvic/Illustration
LONDON (Reuters)-After Fed Chairman Jerome Powell was elected for re-election, the yen hit a 16-month high against the yen and the strongest in more than four years, strengthening the market’s expectations that U.S. interest rates will rise in 2022. expected.
In recent months, the main driving force of the money market has been the market’s different views on the reduction of stimulus measures and the pace of interest rate hikes during the pandemic by global central banks.
“This decision eliminates a source of uncertainty in the financial market and is conducive to the continuity of the Fed’s policy,” Lee Hardman, a foreign exchange analyst at Mitsubishi UFJ Financial Group, wrote in a report to clients.
“We expect U.S. yields and the U.S. dollar to continue to face upward pressure in the short term, while U.S. economic activity and inflation data are surprisingly upward.”
Ulrich Leuchtmann, head of foreign exchange and commodity research at Commerzbank (DE:), said that this decision is good for the dollar because it shows that President Joe Biden respects the independence of the Federal Reserve from the government.
“It turns out that Biden’s nomination on Monday was principled,” he wrote in a report to clients.
On Tuesday at 0819 GMT, the US dollar index was at 96.426, slightly lower than the 16-month high of 96.603 touched during the Asian trading session.
As investors expected US interest rates to be different from Japanese interest rates, the dollar-yen exchange rate rose to its highest level in four and a half years.
The yen is very sensitive to the trend of U.S. Treasury bonds. The yield on the two-year U.S. Treasury bond rose by 8.5 basis points on Monday to the highest level since early March 2020.
At 0824 GMT, the USD/JPY trend slowed down, with the exchange rate falling 0.2% to 114.590, after hitting a high of 115.160 earlier in the session.
The euro-dollar exchange rate rose 0.2% to 1.1258 U.S. dollars, after hitting a 16-month low against the U.S. dollar.
The euro has fallen 2.6% so far this month, affected by the European Central Bank’s moderate monetary policy stance and the recent resurgence of COVID-19 cases in Europe.
The World Health Organization warned earlier this month that the current transmission rate in 53 European countries is a “serious concern” and the German health minister called for further restrictions on public places.
The German PMI data was better than expected, pushing the euro slightly higher. The French PMI data was also stronger than expected.
But the survey shows that shortages of materials and supply chain issues, coupled with rising energy and wage expenditures, have led to unprecedented cost inflation rates, which in turn has caused many companies to increase their expenses to record levels.
The exchange rate against the US dollar fell to a new low of 12. This is the eleventh historical low in a few days after President Tayyip Erdogan defended the recent interest rate cut and vowed to win the “War of Economic Independence.”
The Australian dollar fell 0.1% to US$0.7217 against the US dollar, while the New Zealand dollar fell 0.3% to US$0.6931.
The Reserve Bank of New Zealand is expected to raise interest rates by 25 basis points on Wednesday.
Among cryptocurrencies, Bitcoin is slightly less than $56,000. Earlier this month, it hit an all-time high of $69,000.