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Dollar Pauses After Powell’s Push, Euro Gets Small Break, Nz Rates at a Glance

The dollar took a break on Wednesday after surging against other major currencies. The US currency surged after Jerome Powell was chosen for a second term as Federal Reserve chairman.

The euro, which has been hammered in recent weeks, has gained a little breather thanks to stronger-than-expected business growth surveys. The currency rallied slightly to trade at $ 1.1248 on Wednesday after finding a new 16-month low of $ 1.2226 on Tuesday.

The British pound hit an 11-month low of $ 1.3344 against the rising dollar, while the Australian dollar hovered at $ 0.7255 after falling to a seven-week low of $ 0.7207 overnight. The New Zealand dollar was on the alert ahead of a central bank decision on a rate hike path.

In emerging markets, the Turkish lira collapsed and fell more than 11% in a single overnight session, paving the way for further capital outflows and possibly putting pressure on emerging market currencies in the world.

Among the majors, the market stabilized after the dollar jump.

The kiwi slid ahead of the Reserve Bank of New Zealand meeting, which is the main focus for traders in the Asian session.

“Although the markets already take into account some risk of a 50bp rise, such a move would still lead to a gain in NZD as the implied risk of moves above 50bp in the upside cycle increases,” Reuters said, as quoted by Adam Cole, chief currency strategist at RBC. Capital markets.

“Conversely, a hawkish statement and higher forward guidance should limit the damage if the RBNZ opts for the majority expectation of 25bp.”

The New Zealand currency settled at $ 0.6951 ahead of the meeting, which is at 0100 GMT, after falling overnight to a six-week low at $ 0.6917.

Elsewhere, moves have been light and the dollar has held on to sizable gains made as aggressive changes in rate markets and interest rate expectations poured into currency trading.

The greenback hit a more than four-year high of 115.19 yen on Tuesday, as two-year Treasury yields hit their highest levels since March 2020 and federal funds futures traded in as high as ‘to two rate hikes next year.

Markets believe Powell is more likely to react earlier and harsher to inflation than Lael Brainard – the other candidate for the job, who has been named vice president.

With contributions from the agency

First publication: STI


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