Dollar surges after Fed postpones interest rate hikes to 2023

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The dollar index, which tracks the greenback against six major currencies, rose 0.63% to 91.103, its highest since May 6.

A majority of 11 Fed officials have forecast at least two quarter-point interest rate hikes for 2023, even as officials in their statement pledged to maintain a supportive policy for now in order to encourage a continued upturn in employment.

Projections showed that the inflation outlook was increasing this year, although price increases have always been described as “transient”. Overall economic growth is expected to reach 7%.

“The interesting thing is that the Fed has gone beyond just acknowledging that inflation is on the rise and that the US economy has a lot of momentum, and it has essentially moved to a much more hawkish stance overall. projections, ”said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

Against the Japanese yen, the dollar appreciated 0.39% to 110.49 yen, its highest since April 6.

The dollar, which collapsed for much of 2020, rebounded earlier this year, but that rally of relief appeared to be running out of steam until May as investors remained confident the Fed will hold interest rates. lower longer as it seeks to support the economy. .

While the Fed’s new language doesn’t mean a policy change is imminent, it does provide greater support for the greenback, analysts said.

“I think we are talking again about a slight rally in the US dollar and the data becomes very important in the summer period leading up to Jackson Hole and the September meeting,” said Simon Harvey, senior currency analyst. at Monex Europe.

Risk-sensitive currencies saw a sharp turnaround after the Fed’s announcement, with the New Zealand dollar falling 0.98% to $ 0.7049 and the Australian dollar – which is seen as an indicator of the risk appetite – up 0.95% to $ 0.7612.

The pound, which had strengthened against the dollar on Wednesday after data showed UK inflation unexpectedly exceeded the Bank of England’s 2% target in May, ditched those gains for trading down 0.49%.

Meanwhile, the recent bitcoin rally appeared to be running out of steam, with the world’s largest cryptocurrency falling 4.34% to $ 38,430.03.

(Reporting by Saqib Iqbal Ahmed in New York and Elizabeth Howcroft in London; Editing by Alison Williams, Will Dunham and Alex Richardson)

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