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Thursday, March 30, 2023

The super dollar hit 6-week highs, on a key day for rate hikes

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The dollar strengthened after the minutes of the Federal Reserve meeting will show that policy makers are determined to use a slower pace of interest rate hikes to control the still high inflation.

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Sterling was down 0.58% at $1.2036, while the euro was down 0.44% at $1.0600.

“The Fed minutes have just been released and indicate that some officials may have supported a 50bp hike at the last meeting, although most supported the 25bp result. This certainly supports the US dollar,” Minh Trang said. , a senior FX trader at Silicon Valley Bank in Santa Clara, California.

“The theme throughout February has been a bias toward higher rates, and these minutes are consistent with that outlook,” he added.

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Minutes from the Fed’s Jan. 31-Feb. 1 meeting said most officials supported the quarter-point hike because a slower pace “would allow them to better assess the progress of the economy.” towards reducing inflation to its target of 2%. However, “some” participants were in favor of a higher 50bp hike at the meeting, or said they “could have supported it.”

A series of data in recent weeks has been pointing to strong business activity in the world’s largest economy, a tight job market, strong retail sales and higher monthly producer prices.

St. Louis Fed President James Bullard said the Fed must get inflation on a sustainable path toward its 2% target this year. Or it will risk a repeat of what happened in the 1970s, when rates had to be raised repeatedly.

“The dollar, along with the asset market, is reacting to investors’ realization that it may have been rash to overlook the Fed’s hawkish guidance earlier in the year,” Rabobank’s Jane Foley said in London.

“The stronger-than-expected US data release since the beginning of the month reinforced the Fed’s messages on stronger interest rates for longer.”

Against the yen, the dollar pared losses to trade little changed on the day at $134.95.

Source: Ambito

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