Stampede to the dollar: investors seek refuge from a market on the brink of panic

Stampede to the dollar: investors seek refuge from a market on the brink of panic

The latest concern was raised by the Fitch agency, which placed the “AAA” rating of the United States’ debt on negative watch, a precursor action of a possible downgrade if lawmakers do not reach an agreement to raise the debt ceiling from 31 ,4 trillion dollars.

The greenback has benefited from demand for safe-haven assets as there is only a week left for debt ceiling negotiations to be resolved before June 1, when the Treasury has warned it will not be able to pay all your bills.

Growing signs of economic malaise in Europe, meanwhile, sent the euro tumbling against the dollar. The latest sign of weakness came from Germany, where the economy contracted slightly in the first quarter, slipping into recession after negative growth in the fourth quarter of 2022.

The dollar index, which measures the greenback’s performance against a basket of six even currencies including the euro, rose as much as 0.3% to 104.16, its highest level since March 17.

The euro was down about 0.2% at a two-month low of $1.0715. Sterling was down 0.1%, after briefly touching its lowest level since April 3 at $1.2332. Against the yen, the dollar reached its highest level since November 30, at 139.705 yen.

The greenback has also been supported by reduced bets on Federal Reserve rate cuts this year, as the economy has proved resilient to the effects of the central bank’s aggressive tightening campaign so far.

They have also raised the odds of another quarter-point hike in June to about 1 in 3, after several Fed officials turned hawkish recently, and minutes from the last Fed meeting showed “almost all” policy makers saw upside risks to inflation.

The Chinese yuan rolled over to a six-month low, falling to 7.0903 per dollar in the offshore market, after the latest economic indicators pointed to weak consumer demand and suggested the post-pandemic recovery is here. to its end.

By Samuel Indyk, from Reuters agency

Source: Ambito

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