The Bloomberg Dollar Spot Index rose for the fifth day in a row, posting an increase of nearly 2% - the largest gain since February 2.2023. When tensions in the Middle East affected commodity prices and the US economy, many markets expressed concern about the position of the USD.
The US Federal Reserve is expected to only begin easing policy in September. Last week, the FED was expected to reduce interest rates in July. The repricing comes after a series of strong inflation indicators. The US surprise changed market expectations.
The possibility that interest rates will remain high in the US is weighing on the global monetary system as central banks in developed countries begin to loosen monetary policy. The rising dollar has made other G10 currencies difficult this year, especially the yen.
Nathan Thooft, global chief investment officer of the multi-asset solutions group and senior portfolio manager at Manulife Investment Management, commented: “The Fed will eventually have to reduce interest rates, otherwise the global economy will will be at a disadvantage."
The International Monetary Fund has increased its forecast for global economic growth this year with the US economy leading the way. The IMF also warned that the world economic outlook is still not positive in the context of persistent inflation and escalating geopolitical risks. US industrial production posted a second month of gains, data on Tuesday showed, boosted by a larger-than-expected rise in factory output.
"It's very difficult to resist the dollar's bullish trend right now," Chris Turner, currency expert at ING Groep NV, wrote in a note. He expects the dollar's benchmark exchange rate to continue to rise and head towards its highest level in October.
Depository data from State Street shows that institutional capital inflows into the greenback in the five days to April 5 reached their highest level since November 11.4. Asset managers in particular sold the euro, adding to growing expectations of an upcoming interest rate cut by the European Central Bank.
Michael Metcalfe, currency expert at State Street Global Markets, said: “The unexpected data reinforced speculation that interest rates will eventually diverge, with interest rates falling across European economies in the summer. summer, but probably not in America.”
The Yen exchange rate is currently at 154,74 USD/JPY - continuing to surpass a 34-year peak.
