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Dollar reaches 6-month high against major peers

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On Wednesday, the US Dollar reached a new 6-1/2-month high against other major currencies, while the Japanese Yen dropped to its lowest point since July, fuelled by “Trump trades” in anticipation of important US inflation data later in the day. 


The Dollar has been gaining strength following Donald Trump's victory in the US presidential election last week, which pushed the currency to its highest level since 1st May, reaching 106.21 against a basket of currencies. 


Investors are pricing in the prospect of lower taxes and new trade tariffs under the incoming administration, measures deemed inflationary, and which could potentially lead the Federal Reserve to limit its interest rate cuts.  


At the same time, Republicans are moving closer to securing full control of Congress, which would grant the president-elect greater leverage in pushing forward his agenda, Reuters reports. 


“There is still scope for more Dollar gains,” said Mitul Kotecha, head of FX & EM macro strategy at Barclays.


Kotecha added that the Dollar is being supported by the full impact of potential US tariffs on global imports, the prospect of fiscal stimulus from tax cuts and deregulation, as well as data indicating that US economic strength is likely to persist into the next year.  


The release of US inflation data will take centre stage on Wednesday, with the October Consumer Price Index (CPI) report scheduled for 1330 GMT. The core index is anticipated to have risen by 0.3% in October, matching the increase from the previous month. 


“Evidence of a pickup in headline inflation amid a steady core CPI-inflation rate might boost the (Dollar) even further across the board,” said strategists at Unicredit, going on to add that disinflation signs will unlikely impact the strength of the Dollar. 


“A retreat by the greenback, even a partial one, would likely turn into a buying-on-dips opportunity quite soon, given the market sentiment that is currently prevailing.”


Fed Chair Jerome Powell is set to speak this week, ahead of the release of wholesale price data on Thursday and retail sales on Friday. 


Currently, markets are pricing in about a 60% likelihood of another quarter-point rate cut from the Fed in December, a decrease from approximately 84% a month ago, according to CME Group's FedWatch Tool. 


The Dollar index, measuring the currency against six major peers, increased by 0.1% to 106.12, marking its fourth consecutive session of gains. 

 

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media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

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Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.