×
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

Dollar hits 9-month high as Fed on track to taper this year

The dollar index, which measures the currency against the euro, yen and four other rivals, climbed to 93.347, its highest since April 1
Last Updated 19 August 2021, 07:39 IST

The dollar rose to a nine-month high versus the euro and Australian and New Zealand currencies on Thursday, with Federal Reserve policy makers mostly in agreement that a stimulus taper would start this year.

The euro fell to $1.1684, and the kiwi slid to $0.6848. The Australian dollar fell to $0.72125 but pared most of those losses to trade 0.07 per cent lower at $0.72265 after Australia reported a stronger jobs market than economists expected.

The dollar index, which measures the currency against the euro, yen and four other rivals, climbed to 93.347, its highest since April 1.

The greenback added 0.2 per cent to as high as 110.04 yen. In minutes of their July 27-28 meeting released overnight, Fed officials saw the potential to ease bond-buying stimulus this year if the economy continues to improve as expected, although the condition of "substantial further progress" toward maximum employment had not yet been met.

A reduction in debt purchases is typically positive for the dollar as it means the Fed will not be flooding the financial system with cash.

The focus for Fed watchers now is the annual Jackson Hole, Wyoming symposium, which runs Aug. 26-28. "Our read is that Fed officials will continue to signal ongoing steps toward normalising policy, providing the USD with crucial ongoing underlying support," Westpac strategists wrote in a client note.

"The AUD remains in a powerful four-month downtrend," and looks set to drop below $0.72, while the New Zealand dollar eyes a drop to $0.68, although it should rise later in the year, they wrote.

The kiwi lost support on Wednesday after the Reserve Bank of New Zealand delayed becoming the first G10 central bank to raise interest rates during the pandemic, after a new outbreak thrust the nation into lockdown just a day earlier.

On Thursday, RBNZ Governor Adrian Orr told parliament he still sees the official cash rate gradually increasing towards a more neutral level over the next 18 months.

New Zealand reported 11 new Covid-19 cases on Thursday, with the health chief saying he expects the number to grow. Australia's New South Wales state, home to Sydney, reported record infections for a second day on Thursday, despite a strict lockdown.

However, the Aussie bounced after data showed the country's unemployment rate fell to 4.6 per cent in July, compared with a 5.0 per cent rate consensus estimate from economists, although the Australian Bureau of Statistics said the decline shouldn't necessarily be viewed as a sign of strengthening in the labour market.

ADVERTISEMENT
(Published 19 August 2021, 04:24 IST)

Follow us on

ADVERTISEMENT
ADVERTISEMENT