Connect with us

Hi, what are you looking for?

Forex

Dollar Wins Over Doubters as Tightening Countdown Begins By Investing.com

Dollar in Narrow Range as Fed Officials Continue to Downplay Inflation Fears


© Reuters.

By Yasin Ebrahim

Investing.com – The dollar is winning over some of its detractors who have been pushed off the bearish bandwagon after the Federal Reserve’s hawkish tilt started the countdown on policy tightening much earlier than expected.  

The , which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.29% to 92.37.

The dollar has racked up gains since hitting a bottom in May, but for many, this run higher would turn out to be nothing more than relief rally, and losses would soon follow in the second half of the year as the downtrend resumes.

The crux of the bearish bet centered around the Federal Reserve’s ultra loose monetary policy staying intact, while the European and global economy continued to recover. Unfortunately, caught wind of the faster pace of inflation, and made a hawkish pivot that has rocked the short dollar bet. 

ING on Thursday slashed its outlook on the to $1.23 from $1.28, conceding that its bet on weaker dollar into the back of the year was unlikely to take shape.

“On the assumption that the Fed starts formally tightening in 3Q22, it would be no surprise to see a bearish flattening of the US yield curve – preparing for the Fed to apply the monetary brakes – from 2Q22 onwards,” ING said in a note. “That is when we would expect the dollar to embark on a broad rally.”

For the months, the Federal Reserve shrugged off the turn up in the pace of inflation as transitory, and said it would let it run above target for some time under its new average inflation targeting regime. But the central bank’s resolve to persist with this regime change was tested when inflation hit the highest levels in years.

“What has changed is that the Fed looks less committed to Average Inflation Targeting and more towards a conventional lift-off in rates which could come as early as autumn 2022,” ING said in a note. “This assumes the Fed starts tapering shortly after the August Jackson Hole gathering– a tapering process that could last until spring/summer ’22.”

The Fed’s worries over inflation were a hot topic in their June meeting.

“Although they generally saw the risks to the outlook for economic activity as broadly balanced, a substantial majority of participants judged that the risks to their inflation projections were tilted to the upside because of concerns that supply disruptions and labor shortages might linger for longer and might have larger or more persistent effects on prices and wages than they currently assumed,” the Fed’s minutes showed.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Click to comment

Leave a Reply

Your email address will not be published.

You May Also Like

Technology

Cybercriminals Adopt the Blockchain to Broadcast confidential Messages A group of analysts from SophosLabs represents that programmers working the crypto-jacking malware, Glupteba, have been...

Technology

PUBG unban in India soon as PUBG Corp. Will The Government Of India Unban PUBG? PUBG Mobile was Ban in India, PUBG organization has...

Technology

A standard method to execute Bitcoin could be powerless against double-spending, the new examination has found. Blockchain sleuths at ZenGo, a wallet startup, have...

BlockChain News

HDD mining, also known as “storage mining”, is a process of obtaining cryptocurrency based on hard disk memory. Compared with traditional POW mining, hard...