Wednesday, July 6, 2022

Dollar remains confident even after hitting 20-year high

Dollar index rises 0.7% on 12th, continues to climb 20-year high.Reuters

Ren Zhongyuan / Comprehensive foreign power due in April due to US consumer pricesindex(CPI) growth is still strong, and the Federal Reserve (Fed) cannot slow the rate of interest rate hikes. The US Dollar Index rose 0.7% intraday on 12th, continuing to climb to 20-year high. Analysts said the dollar’s growth will get further impetus.

The dollar index rose 0.7% to 104.539. US The CPI rose higher than expected in April, and economists have raised the final interest rate target. Dooley, former chairman of the New York Federal Reserve Bank, predicted the Fed should raise the final rate to 5% to curb inflation; If so, 2-year Treasury noteyieldStill to rise, the dollar exchange rate will also have strong support.

Furthermore, sinceamerican stockIt seems that the bottom has not yet been reached, and there is a “hazardous” environment in the market, which will also help the dollar appreciate, especially as the Fed is about to initiate the quantitative tightening (QT) process.

Morgan Stanley predicts that the dollar’s modest broad-based rally will continue in the third quarter, with forecasts of 105 increases.

The strength of the dollar’s outlook also depends on the performance of other currencies, but strategists at Bloomberg Intelligence point out that taking this factor into account, the dollar still has reason to strengthen.

As for the euro, although the European Central Bank (ECB) indicated it could start raising interest rates in July, the tightening force this year is still far less than that of the Fed, and the Russian-Ukrainian war still looms large over the euro. It is harmful to the region’s economy and the euro.

As for the pound, it will be hard to come by in the short term as the Bank of England has warned the economy could stall in the next two years and around 600,000 people could lose their jobs.

The short-term performance of the Australian dollar and the New Zealand dollar will be determined by the risk environment, and investor confidence in the Australian/New Zealand currency is unlikely to turn positive anytime soon. Market confidence has been weakened by the imposition of epidemic prevention restrictions in mainland China and continued decline in US stocks.

If US stocks continue to fall, the yen could become a safe haven. But if a 2-year U.S. If the Treasury yield continues to rise, the yen’s safe-haven appeal will not be enough to prevent the dollar/yen pair from circling higher.

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