In that context, the dollar index, which measures the value of the US currency against its competitors, rose 0.61% on Wednesday to 103,752, after closing practically unchanged on Tuesday. And so it reaches its highest value since December 27 after US retail sales rose sharply in January, suggesting that the Federal Reserve will keep interest rates higher for some time.
“The terminal rate has risen to around 5.25,” said Ivan Asensio, head of FX at Silicon Valley Bank in San Francisco. And he added that this raises renewed expectations that it will now go up 25 (basis points) in March and then 25 in May, as expected, but it also opens up the possibility that rates will have to stay higher for longer.
Thus, the dollar appreciated Wednesday against most of the world’s major currencies. For example, against the euro, which fell 0.42%, to u$s1,069 and it showed a considerable drop from the maximum it had touched in 10 months on February 2, when it traded at $1,103.
“Is a reaction to CPI dataand also to the tone of the Fed officials recently,” said jane foley, Rabobank’s head of foreign exchange strategy, in dialogue with Reuters. “The market now expects a higher spike in the Fed’s federal funds rate than they expected even a week or two ago.”
He Japanese yen rose 0.8% in the day at 134.18 units per dollar. And he rallied from the six-week low he hit earlier in the session, when he settled at 133.44 yen to the dollar.
The pound sterlingfor its part, fell 1.21% to $1.2035 in a context in which the british inflation cooled higher than expected in January and came in at 10.1%, easing some of the pressure on the Bank of England to continue raising rates.
On the other hand, regarding the United States, in December, the median projection of the members of the Fed expected that the cost of credit would reach a maximum of 5.1% this year. But interest rate futures markets are now pricing in a high above 5.2% and traders are increasingly unsure of cuts in 2023. Rates currently sit between 4.5% and 4.75%.
“We must remain prepared to continue raising rates for a longer period than anticipated, if that avenue is necessary to respond to changes in the economic outlook or to offset any unwanted easing in conditions.” said the president of the Dallas Fed, Lorie Loganin a speech at Prairie View A&M University in Texas.
Source: Ambito
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