Dollar Traded Near Its Highest Level Against the Main Peers

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Federal Reserve and a Digital Version of the U.S. Dollar

The dollar was close to its highest level in three months versus major peers on July 8 after minutes of the Federal Reserve’s June meeting confirmed the central bank is moving toward tapering its asset purchases in the foreseeable future. They expect the progress to continue and agreed they must be ready to act if inflation or other risks materialize, according to the minutes of the Federal Open Market Committee’s (FOMC) June policy meeting released on Wednesday. Nevertheless, the prevailing mindset was that there should be no rush and markets must be well prepared for any shifts.

The committee decided to keep short-term interest rates near zero but also indicated that it might be adjusting policy otherwise in the months ahead. The Federal Open Market Committee did not change its benchmark rate anchored in a range between 0% and 0.25%.

Economists expect the country’s central bank to announce a strategy for tapering its asset purchases in August or September. Interestingly, many of them predict the first cut to its bond-buying program beginning early next year. Some economists forecast it will happen in the final quarter of this year.

The dollar index, which measures the U.S. currency against six rivals, rose to 92.759. On Wednesday, the index reached 92.844 for the first time since April 5.

 

Dollar, euro, and other major currencies

The U.S. currency was flat at $1.1791 per euro, just off a three-month high of $1.17815 touched overnight. This week German data raised questions about the strength of Europe’s economic recovery. Investor sentiment in Europe’s biggest economy declined sharply in July, though it remained at a very high level.

In several hours, European Central Bank President Christine Lagarde will hold a press conference. The monetary authority will announce the outcome of an 18-month strategy review. Lagarde will discuss this and other important issues with journalists.

Elsewhere, the dollar traded slightly lower at 110.585 yen, as a slide in U.S. Treasury yields continues to affect the currency pair.

The Australian dollar declined 0.2% to $0.74650. But it was still near the middle of the board range in place over the past several weeks.

Reserve Bank of Australia Governor Philip Lowe reiterated the central bank’s position on Thursday. Governor Lowe stated that the jobless rate would need to fall further and hold in the low 4% levels to lift inflation.

One day earlier, the central bank took its first step towards stimulus tapering by announcing that the third round of its quantitative easing program would be smaller in scale than the previous two.

The New Zealand dollar fell below the psychologically important 70 cent mark, sliding 0.4% to $0.69920.

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