The Dollar is falling as Hawkish Fed comments diminish

LONDON – On Thursday, the dollar fell against all major currencies as investors waited to see if there were any more data points to prove that large-scale rate increases to reduce inflation were imminent.

The Bank of England was widely expected to raise interest rates by the most since 1995, with sterling rising before the rate decision at 1100 GMT.

Fed officials continue to challenge the notion that U.S. rates are close to peaking. Mary Daly, San Francisco Fed President, and Neel Kashkari (Minnesota Fed President) expressed their resolve to reduce high inflation overnight.

The dollar’s hawkish rhetoric seemed to have been losing its impact. As the London session progressed, the currency became more cautious.

“Yesterday, we made some hawkish remarks, but it’s possible that this’s not enough. Investors will look for data confirmation, particularly tomorrow’s payrolls numbers,” Francesco Pesole (ING currency strategist) said referring to U.S. job data.

” The dollar’s effect is diminishing today. Markets are not too concerned about Taiwan’s situation , but risk sentiment is more positive.

The dollar index, which measures the greenback against six peers, was at 106. 18, down about 0.3 percent but holding above a one-month low hit earlier this week.

The euro rose 0. 25 percent at $1.0195. The dollar was 0.2 percent firmer at 134. 13 yen.

A Reuters poll on Thursday revealed that the dollar’s strength is still far from its peak. Of those polled, 70 percent thought the dollar was yet to peak in this cycle, even after the dollar index hit its highest level in two decades in July.

Money markets price in a 50 bps hike at the Fed’s September meeting, and a roughly 44 percent chance of another massive 75 bps increase. The Fed hiked rates by 75 bps at its meeting in June and July.

Britain’s pound rose 0.3 percent to $1.2187. The BoE was widely expected to raise rates by an aggressive 50 basis points to 1. 75 percent, the highest level since late 2008.

The BoE has never raised the Bank Rate by a half point since it was made independent in 1997.

Jane Foley from Rabobank, London’s head of currency strategies, stated that sterling’s response would depend on the BoE’s outlook regarding large rate increases.

” You have to wonder, is the BoE any more hawkish that other central banks? The answer is likely not,” she stated.

Risk currencies rallied after a little nervous tension about Nancy Pelosi, House of Representatives Speaker’s trip to Taiwan was dissipated.

The Australian dollar stood at $0. 6968, was up 0.6%. New Zealand had a currency that was 0.6 percent more expensive at $0 .6309.

By Dhara Ranasinghe

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