On Monday, government bonds sold off and stock markets around the world were hit hard.
“The dollar extended its gains from Friday as risk continues to decline across the board,” Brad Bechtel, global head of FX at Jefferies, said in a note.
The dollar index – which measures the performance of the greenback against six currencies – rose 0.6% to 105.04 units, after reaching a maximum since December 2002.
Traders have a lot on their minds this week, including the Fed, Bank of England and Swiss National Bank monetary policy meetings.
Markets expect the Fed to raise its interest rate by 50 basis points on Wednesday, with some like Barclays and Jefferies expecting a 75 basis point hike.
The battered yen, reeling near lows against the dollar not seen since 1998, was one of the major currencies to gain against the greenback on Monday.
The yen found some support in comments from Japan’s top government spokesman on Monday that Tokyo is concerned about the currency’s sharp decline and is ready to “respond appropriately” if necessary.
The Bank of Japan has so far resisted pressure to tighten its monetary policy, which has weakened the country’s currency.
The dollar fell 0.1% to 134.25 yen.
Sterling fell to a one-month low against the dollar, under pressure after data showed the British economy unexpectedly contracted in April. Tensions with the European Union over post-Brexit trade with Northern Ireland also weighed on the pound, which fell 1.4% to $1.2146.
Prayed
The Gold and palladium fell sharply on Monday as the dollar rallied on bets of sharp interest rate hikes by the US Federal Reserve.eroding the appeal of bullion and other precious metals.
Spot gold fell 2.2% to $1,829.52 per ounce by 1605 GMT. US gold futures were down 2.4% at $1,829.80 an ounce.
The dollar index hit a multi-decade high, becoming the safe haven of choice at the expense of gold as the rising cost of credit reduces the appeal of bullion, which pays no interest.
“A massive correction is underway, and when volatility is this high, you can’t find safety or comfort anywhere,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
Friday’s larger-than-expected US CPI data prompted traders to now bet on a total of 175 basis points (bps) in rate hikes for September, with some seeing the possibility of a 75-bps move this week. .
On Friday, gold fell to a nearly one-month low, but then rebounded strongly amid a volatile session as economic concerns captured the market’s attention. That volatility carried over into Monday, with bullion seeing a sharp pullback from a one-month high reached during the Asian session.
Gold’s move underscores the current tug-of-war between its price drivers, with firm inflation offset by bets of aggressive monetary policy responses, JP Morgan said in a note.
Meanwhile, palladium sank nearly 7% to $1,880.90 an ounce. Silver fell 3% to $21.22 an ounce and platinum fell 3.6% to $938.31.
Source: Ambito
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