Tapering Action Wakes Up U.S Dollar Bulls
As the United States Federal Reserve plans to begin asset tapering much sooner than its developed market peers, the dollar jumped higher in London, hitting its highest level in a month.
US Dollar Index Futures, which gauges the greenback strength against a basket of other currencies, now trade above 93.35.
The Fed did not announce that it would begin asset tapering as it handed down its policy decision on Wednesday.
Defining the taper coming in November directly is undoubtedly a hawkish move from Powell. He said it may be possible to achieve the flags at the upcoming meeting. In fact, the Fed Chair does not even mention that additional data is needed, or that new forecasts are due in December. A stronger dollar results from printing fewer dollars earlier.
It may be around the middle of next year that tapering will conclude, triggering the countdown to interest rate increases. While Powell attempted to separate tapering from lift-off, the greenback was taking off. Higher interest rates make the dollar more attractive.
Chairman Jerome Powell said that the central bank believed tapering would be completed around 2022, which could lead to an increase in interest rates afterward.
As for the beginning of the taper, Powell said there was general agreement that asset tapering would end by 2022, but he did not give any specifics.
The timing of the tapering starts here, which starts the clock on when the next hike will happen, which is more important in our opinion.
In response to the Fed’s policy decision, the safe-haven yen took a 0.5% tumble for the session, which was its sharpest fall since mid-October.
As announced in the latest statement from The Bank of Japan (BOJ), its interest rate remained unchanged at -0.10%. Interest rates are not likely to be raised by either the BOJ or the ECB anytime soon.
A settlement of a bond interest payment by the main unit of China Evergrande Group caused some losses for the yen on Wednesday. On Thursday, however, interest on a bond issued offshore is due for $83.5 million.