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Dollar Down On Monday As Risk of Recession Continues To Rise

Derek Wolfe

Updated: June 21, 2022

dollar down
Editor’s Note:


The article you’re about to read exemplifies the kind of “filler” content garbage that means absolutely nothing in the larger scheme of things. The opening sentence gives you the impression that the dollar plunged in response to global economic uncertainty. It’s true that the global outlook is far from bright, but take a look at a chart of the dollar index, preferable using a monthly time scale. It is hovering a few points below a 20-year high. What the author calls “down” is arguably a technical “breather” as the index price hit a new high and is now consolidating near record levels. To be clear, we see severe long-term weakness in the dollar. But what we don’t agree with is cheap content that makes much ado about nothing. 

Here’s our take: If you’re a technician, the critical level to watch out for is 101.30. If broken, the dollar can fall to as low as 98.00 from a strictly “technical” perspective. Fundamentally, you’d be better off avoiding the temptation to time price swings and instead pay attention to the big picture: inflation is wreaking havoc on the dollar’s purchasing power. You have the choice of either hedging the dollar using safe-haven assets or taking your chances unhedged in an inflationary environment.

The dollar was down on Monday morning in Asia as the economic outlook remained uncertain.

The U.S. Dollar index that tracks the greenback against a basket of other currencies fell 0.29% to 104.40 by 12:56 AM ET (4:56 AM GMT). U.S. markets will be closed on Monday for a holiday.

The USD/JPY pair inched down 0.03% to 134.93. The Bank of Japan (BOJ) kept its ultra-loose monetary policies among its hawkish global peers, sending the yen even lower.

“The market was gearing up for a BOJ capitulation (but) got exactly the opposite,” sending the yen tumbling, National Australia Bank senior foreign-exchange strategist Rodrigo Catril said in a note.

The AUD/USD pair gained 0.44% to 0.6960, while the NZD/USD pair jumped 0.36% to 0.6327.

The USD/CNY pair fell 0.63% to 6.6743, and the GBP/USD pair edged up 0.11% to 1.2238.

Major central banks tightened monetary policies last week with interest rate hikes. The U.S. Federal Reserve decided to raise interest rates by 75 basis points last Wednesday, the biggest since 1994, despite rising risks of a recession. Surprisingly, the Swiss National Bank also hiked interest rates by 50 basis points on Thursday while the Bank of England followed to raise to 1.25% on the same day.

Fed Chair Jerome Powell will testify to the Senate and the House on Wednesday and Thursday. The Fed vowed last week that its commitment to tame inflation was “unconditional” while Fed Governor Christopher Waller said on Saturday that he would support another hike of 75 basis points in July.

U.S. President Joe Biden said on Saturday that he was considering lifting some tariffs on China and a possible pause on the federal gas tax to fight inflation.

Originally published on Yahoo Finance.

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