Dollar rises after Fed doubles down on aggressive stance; euro falls

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The dollar rose against the yen on Thursday, rising in nine of the past 10 sessions, after Federal Reserve Chairman Jerome Powell reiterated that he will continue to raise interest rates. to control rising inflation and warned against premature easing of monetary policy.

*In recent months, the dollar-yen has been the pair most sensitive to expectations of rate hikes.

  • Across the Atlantic, the European Central Bank raised rates by a record 75 basis points, pushing the deposit rate above 0% for the first time since 2012. The euro initially broke parity against the dollar, but then has been weakened in the wake of Powell’s comments.
  • Fed officials now enter a quiet period ahead of the September 20-21 meeting.
  • In remarks at a Cato Institute conference, Powell said the Fed must move forward until it gets the job done and that it is “firmly committed” to reducing inflation.
  • “Once again, Powell reiterates the job of the Fed, that they are mandated by Congress to maintain price stability and employment,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab (NYSE: SCHW ) in Austin, Texas.
  • “It sounds like your main concern is price stability, and you realize that could have a negative impact on employment, but given the incredibly low levels of unemployment, you’re essentially saying there’s room for unemployment to rise without causing a major problem,” he added.
  • US rate futures have priced in an 87% chance that the Fed will raise the cost of borrowing by another 75 basis points at this month’s meeting, which would take the benchmark rate into the 3-3 range, 25%.
  • In the afternoon in New York, the dollar was stable at 109.63 yen. On Tuesday, it hit a 24-year high of 144.99 yen. The dollar index was stable at $109.63, after reaching its highest level since June 2002 the previous day.
  • The euro fell 0.1% to $0.9964.
  • The European Central Bank said it expected to continue raising rates to curb demand, prioritizing fighting inflation even as the euro zone heads toward a likely winter recession.
  • The yen, meanwhile, has been a particular victim of recent dollar strength, in part due to its sensitivity to rising long-term US yields as aggressive bets from the Fed and the Bank of Japan continue to rise. being the moderate central bank.
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