Dollar Up as Fed Asset Tapering Expectations Grow

On Tuesday morning, dollars reached a high rate in Asia, retaining their strength over thriving anticipations that the U.S. The Federal Reserve could commence asset tapering a bit sooner than anticipated. The U.S. Dollar Index that trails the greenback against a basket of other currencies inched up 0.04% to 92.977 by 10:53 PM ET (2:53 AM GMT).

The USD/JPY pair inched up 0.06% to 110.34, as the Japanese opened their markets after a holiday. The AUD/USD pair inched down 0.10% to 0.7326 and the NZD/USD pair was down 0.23% to 0.6975. The USD/CNY pair inched down 0.03% to 6.4835 and the GBP/USD pair inched down 0.05% to 1.3836. Expectations that the Fed will begin asset tapering increased safe-haven investments such as the Swiss franc and gold. The euro fell to $1.1732, its deepest since early April 2020.

Asset Tapering To Commence 

Rakuten Securities senior strategist Jun Arachi talking to Reuters stated that:

“The market is repricing the Fed’s tapering. It has only begun and I expect the market adjustment to continue. The market will likely test the euro’s low so far this year of $1.1704 marked on Mar. 31,”. 

A stronger-than-expected U.S. jobs report, published during the previous week, saw U.S. Treasury profits rise to three-week highs and a vast comeback for the U.S. currency. The report announced non-farm payrolls rose by 943,000 and the unemployment rate declined to 5.4% in July.

Atlanta Fed Bank President Raphael Bostic also said on Monday that he anticipates asset tapering to commence in the fourth quarter, but that an even faster move could be feasible should the jobs market retain its recent pace of development. In the Asia Pacific, expectations of an interest rate hike by the Reserve Bank of New Zealand when it hands down its policy decision in the following week proceeded to give New Zealand a small boost.

U.S. Dollar Boost

The U.S. currency got an increase from the strong U.S. jobs report that increased bets that the Fed could start asset tapering and hike interest rates earlier than expected. “U.S. payrolls were a game-changer,” Chris Weston, head of research at brokerage Pepperstone in Melbourne, mentioned in a note. The dollar index is eyeing a close above the 9marks, and the greenback could head for $1.1704 per euro, the note added. The dollar could also see further gains versus the yen as well. The benchmark 10-year U.S. Treasury yield climbed to a two-week high of 1.3053% on Friday. Investors now await more U.S. economic data, including the core CPI, due on Wednesday.