However, the greenback rallied in midday trading in London as traders cut back on some of those bets on concern that other economies, notably Europe and China, continue to struggle in the near term.
“The problems for other currencies are mounting, particularly in Europe, where growing fears over gas and energy shortages continue to weigh on the euro and threaten the ECB’s ability to tighten monetary policy as much as it might wish,” he said. Stuart Cole, chief macroeconomic strategist at Equiti Capital in London.
Against the dollar, the single currency fell 0.7% to $1.0129, while it lost more than 1.3% against the yen.
Berenberg’s economists estimate that the European Union could have to pay some 430 billion euros ($435.63 billion) or up to 3% of the region’s GDP in 2021 in natural gas bills. JP Morgan expects the economy to enter a mild recession early next year.
However, the dollar’s rise was not across the board.
The yen rose almost 1% to 135.10 per dollar, its highest level since early July. The Japanese currency was the main recipient of the widening interest rate differential between the United States and its global peers.
Markets have already raised bets on a reduction in future US interest rate hikes, with futures assigning a 65% chance of a 50 basis point hike in September, up from 50% on Wednesday, according to CME. Bets on a 75 basis point raise have been reduced to 35% from 41%.
The dollar index, which measures the greenback’s performance against six currencies including the yen, rose 0.5% to 106.84, after falling 0.59% during the Asian session, virtually erasing most of his losses for the day.
By Saikat Chatterjee
Source: Ambito
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