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Dollar Down Ahead of the ECB Meeting and US Inflation Data

The US dollar value went down last week in Asia as inflation wrecked the US.

Hillary Opondo Jun 14, 2022

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The US dollar value went down last week in Asia as inflation wrecked the US. Thus, the entire stock market focused on the ECB (European Central Bank) policy decisions and meetings. The US dollar consumer price index dropped to 102.45 by 0.09 percent at around 4:29 AM GMT (12:29 PM ET). Yet, it remains the currency index that tracks the greenback for several currencies worldwide.

For instance, the USD per JPY rate edged to 134.09 by 0.12 percent. In other words, the yen clawed back after a 20-year low by early morning last week on Thursday. However, the Bank of Japan retained previous policies. On the other hand, the AUD per USD rate dropped to 0.7183 by 0.13 percent, while the NZD per USD rate dropped to 0.6452 by 0.08 percent.

The USD per CNY rate dropped to 6.6768 by 0.10 percent, while the GBP per USD rate dropped to 1.2535 by 0.04 percent. The official government data indicated that China increased its exports by 16.9 percent year-on-year over May. This data reflected Covid-19 disruptions and curbs to logistics and production. Thus, it recovered production, beating market expectations.

Other forecasts showed that China had an 8.0 percent growth in May and a 3.9 percent growth in April. The ECB later on Thursday handed down its policy decision and predictably ended its long-running program for purchasing assets. Its president (Christine Lagarde) leaned into a hawkish interest rate plan for the future to give a boost to Euro & Dollar value.

Carol Kong (currency strategist at Commonwealth Bank of Australia) told Reuters that they did not expect a rate hike. She explained that the ECB had talked about sequencing and intended to stop any asset purchases before raising the interest rates. However, she did not rule out a rate hike due to economic rationale and the record-high inflation.

In any case, the stock market recorded a 50-basis point rate hike after the European Central Bank meeting due to the high euro zero inflation. Hence, most investors remained cautious about the interest rate hikes and its recession. The OECD (Economic Cooperation & Development) warned that the Russia-Ukraine war slashed its growth forecasts by setting a world economic outlook bleaker.

Final Word on Dollar Index Fluctuations

The government data released earlier before the ECB meeting and U.S inflation report about the grim global growth outlook is wary. It highlighted other matters like the risk-sensitive Australian dollar and the weekly initial jobless claims. Thus, it is crucial for central banks to monitor their interest rates and help control inflation and dollar index fluctuations. 

Hillary Opondo

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