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Dollar rises as Fed signals more rate hikes to come

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The US Dollar gained on Thursday following the Federal Reserve leaving rates unchanged but saying more hikes were to come this year.


The US central bank's pause brought an end to 10 straight rate hikes, yet policymakers forecast another two increases before the end of the year. According to Fed Chair Jerome Powell, rate cuts during 2023 would not be appropriate.


"Fed delivered a hawkish skip," stated Mohit Kumar, chief financial economist Europe at Jefferies.


"The revision to the dot plots was more hawkish than our expectations as we had expected an upgrade to reflect one more possible hike."


At the time of writing, the Dollar index – measuring the currency against six peers – stood at 103.09, a rise of 0.2%, rallying from a four-week low on Wednesday of 102.66, Reuters reports. 


Elsewhere, ahead of the European Central Bank (ECB) meeting on Thursday, the Euro was flat against the Dollar at $1.0841 after hitting a four-week top on Wednesday of $1.0865. 


Money markets forecast the ECB will hike the deposit rate by 25 basis points, with another quarter-point increase expected next month. 


"Markets will be looking for communication on the balance of risks and whether there's a need for further rate hikes, but we think the potential for big market moves is much smaller than it has been for recent ECB decisions," according to the head of FX and corporate research at Danske Bank, Kristoffer Kjær Lomholt. 


"Our preference is for the US economy to do better than the eurozone … and hence the Dollar looks like a more attractive currency to buy compared to many other currencies, including the Euro," Lomholt went on to say. 


The Bank of Japan (BoJ) is holding its meeting on Friday and is set to maintain its ultra-dovish approach. 


"We don't expect changes to yield curve control at tomorrow's meeting, but we think we are getting closer to that policy shift," Lomholt stated.


The Yen fell 1% to 141.50 per Dollar, a level not seen since last November, the Reuters report goes on to say. 


"Dollar-Yen is at year highs, and markets are increasingly beginning to talk about whether a further rise could trigger the BoJ to verbally and also effectually intervene in the FX market," Lomholt added. 

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Mauritius,
J. Balcikonio str. 9,
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Lithuania,

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.

Contact

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.