Dollar rallies as market brings rate hike expectations forward The US dollar rallied strongly on Wednesday, and held near a two-week high against its major rivals on Thursday, after the Federal Reserve suggested an end to its record bond-buying program this fall and a rate hike six months after that. The Fed FOMC decided to reduce asset purchases by $10 billion to $55 billion and said it may keep rates at low levels even after it attains its inflation target and the job market recovers completely. The market reacted by bringing forward interest rate hike expectations. US Treasury yields jumped more than ten basis points to above 2.79 percent while US shares tumbled. The dollar posted its largest gain in seven months against a basket of major currencies. The Bloomberg Dollar Index advanced 0.8 percent yesterday, its largest day’s gain since August 1st of last year. EUR/USD sold off aggressively to 1.3810 from 1.3920 before the Fed’s announcement. USD/JPY jumped to 102.68, and now trades around 102.37, its highest in a week. Asian shares followed on Thursday morning, with the Nikkei down more than 1.50 percent and German Bund futures slipped lower. Gold extended its slide after the Fed’s announcement, dropping to $1’325.92, after trading above $1’390 only last Monday. China’s yuan continued its slide on Thursday, extending its drop to a fifth consecutive day. China’s central bank helped the currency weaker, hitting a one-year low. The kiwi dollar plunged more than a 100 points lower from Tuesday’s peak leading commodity-linked currencies lower, after data showed economic growth in New Zealand slowed in the fourth quarter. NZD/USD fell to 0.8522 by the time of writing. Good day
Posted on: Thu, 20 Mar 2014 08:32:39 +0000
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