Dollar rises before the Fed and ECB meetings

On Tuesday, the U.S. dollar increased again after recovering from a drop that nearly destroyed its earnings before. It happened as major central banks chose different ways to fight inflation or the pandemic’s economic drag.

In afternoon trading, the U.S. dollar index was up 0.3% at 96.5521 in New York after it had given up its Monday growth of 0.5%.

The rebound appeared mainly at the euro’s cost. Markets outlined another report of a sudden high U.S. inflation that might push American interest rates higher than expected. Also, it might happen sooner than in Europe.

Overview

The dollar’s safe-haven attraction also improved after stock indexes declined in Europe and the United States. Oil fell on a forecast that the spreading new Omicron strain will reduce global demand.

The euro decreased more than 0.3% at $1.1257.

Global currency analyst at Action Economics in Safety Harbor, Ron Simpson, said that the difference between the monetary policies of the European Central Bank and the U.S. Federal Reserve is changing the euro-dollar exchange rate.

The Fed thinks to update its policy on Wednesday, while the ECB plans the update on Thursday.

On Wednesday, analysts expect the Fed to indicate that it decides to quicken its taper.

Data published earlier on Tuesday showed that producer prices rose more than expected while indicating the latest signal of higher U.S. inflation. The data showed the most significant annual growth in the last decade.

Chief investment strategist at BlueBay Asset Management, David Riley, said that the Fed has to react to higher inflation. He added that it’s challenging not to be positive on the U.S. dollar in this environment.

The Japanese yen fell, with the dollar trading at 113.75 yen. Crypto bitcoin surged 3% at $47,788 but remains 31% below record highs.

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