The US dollar gains positions at the start of trading this Friday in Europe, while the Chinese yuan crosses a crucial threshold, as concerns about rising interest rates and possible recession have dented the interest in risk.
At 9:10 AM ET, the dollar index , which tracks the dollar against a basket of six other major currencies, was up 0.1% at 109.545, not far off two-decade highs. registered at 110.79.
Both the World Bank and the International Monetary Fund warned on Thursday of an imminent slowdown in the global economy. Indermit Gill, the World Bank’s chief economist, has said she is concerned about “widespread stagflation,” a period of low growth and high inflation.
Fears of a global recession are mounting as many central banks aggressively tighten monetary policy to combat inflation at record levels.
All signs point to the Federal Reserve raising interest rates by 75 basis points next week, and the Bank of England is seen as likely to raise interest rates for the seventh consecutive time.
This unfavorable economic evaluation has weighed down the currencies that are perceived as more risky, with the dollar being the main beneficiary.
The Chinese yuan has breached the critical threshold of 7 per dollar for the first time in over two years, rising USD/CNY 0.3% to the 7.0121 level, despite data showing surprising resistance from the Chinese economy, as industrial production has grown faster than expected and retail sales have increased at their fastest pace in six months.
EUR/USD is down 0.1% to the 0.9990 level, trading below parity ahead of the Eurozone CPI data for August . This data is expected to show that the bloc’s inflation remains resilient, rising 0.5% for the month as a whole and 9.1% in annual terms, as the region struggles to cope with rising energy prices.
GBP/USD is down 0.3% to the 1.1424 level after UK retail sales posted their biggest drop so far this year in August, down 1.6% in for the month as a whole and 5.4% in annual terms, as the cost of living crisis more than offset a slight easing in fuel prices in the month.
USD/JPY rises 0.1% to 143.59 as yen struggles and two-year US Treasury yield hits new high of 3.901% this Friday, its lowest level high since 2007.
The Bank of Japan is also meeting this week, but is highly unlikely to authorize a rate hike, meaning the JPY will suffer more from widening interest rate spreads.
The AUD/USD pair is trading 0.1% higher to the 0.6706 level, recovering after hitting a two-month low at 0.6685 earlier in the day.
Furthermore, the USD/RUB pair is up 0.4% to the level of 60.0288 ahead of the latest monetary policy meeting of the Russian central bank. Most economists surveyed by Bloomberg expect a half percentage point cut to 7.5%, which would be the smallest interest rate cut since the central bank began easing monetary policy after the Ukraine invasion. .