The dollar is at its lowest level in 8 months… a decline that will not stop even after the Federal Reserve meeting! Powered by Investing.com

The dollar is at its lowest level in 8 months… a decline that will not stop even after the Federal Reserve meeting! Powered by Investing.com
The dollar is at its lowest level in 8 months… a decline that will not stop even after the Federal Reserve meeting! Powered by Investing.com
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© Reuters.

Investing.com – The dollar held near an eight-month low against its peers on Thursday, as a downbeat US corporate earnings season stoked recession fears, and as traders remained on guard ahead of a series of central bank meetings next week.

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dollar now

The American dollar, which measures the greenback against a basket of currencies, rose 0.1% to 101.65, after falling as low as 101.52 earlier in the session, to test an eight-month low last week at 101.51.

Trading was thin, with Australia off for a holiday and some parts of Asia still off for the Lunar New Year.

Pessimistic trends… a continuous decline in the dollar

Earnings, downbeat guidance from US companies and a series of layoffs in the technology sector have deepened fears of a sharp economic contraction in the US, prompting investors to scale back expectations on how long the Fed will need to raise interest rates aggressively.

“There are now indications that the US economy may be slowing in a more effective way,” said economists at Wells Fargo (NYSE:WFC).

“With the Fed no longer taking charge of raising interest rates and forecasting US economic trends to worsen, we now believe that the US dollar has entered a prolonged period of decline against most foreign currencies.”

As the Policy Committee begins its two-day meeting next week, markets have priced in a 25bp rate hike, a reversal from the central bank’s 50bp and 75bp hikes last year. Which exposes the dollar to further weakness.

Before that, the Commerce Department is set to release advance estimates of US fourth-quarter GDP later on Thursday.

The dollar against the pound and the euro

Meanwhile, markets expect policy makers of the Bank of England and European Central Bank (ECB), which will also meet next week, to raise interest rates by 50 basis points. The ECB is likely to remain hawkish.

The pound was little changed at $1.2400, while falling 0.03% to $1.0911, although it remained close to the nine-month high of $1.0927 hit on Monday.

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“The euro is attracting a lot of attention,” said Jarrod Kerr, chief economist at Kiwi Bank. And the eurozone “has had a proper winter…the energy crisis that people were expecting is not over yet.”

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dollar against other currencies

Elsewhere, the Canadian dollar was last trading at 1.3399 against the US dollar, after the Bank of Canada on Wednesday raised its key interest rate to 4.5%, but became the first major central bank to fight global inflation to say it will likely halt further increases in the dollar. present time.

Also, it rose 0.2% to $0.7117, on higher expectations that the Reserve Bank of Australia has more work to do to raise interest rates, after shock data on Wednesday showed that Australian inflation rose to a 33-year high in the past quarter.

The New Zealand dollar also rose 0.1% to $0.6486, after falling 0.43% in the previous session as New Zealand’s fourth-quarter annualized inflation fell short of central bank expectations.

As for Asia, it increased by 0.2%, to 129.32 per dollar.

A summary of views at their meeting on Thursday showed that BoJ policymakers discussed the inflation outlook at their meeting in January, with some warning that the rise in wages could take time.

At that meeting, the Bank of Japan kept ultra-low interest rates unchanged, but strengthened its monetary policy tool to prevent the 10-year yield from breaching the new 0.5% cap. Its decision defied market expectations of further monetary policy adjustments.

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