After a consistent low for the last few months in 2021, the dollar had a slight increase in a quiet manner against the major currencies across the globe. In the last year, the dollar index grew by 8% which is the biggest jump since 2015.
This hike is due to the high-interest rate imposed by the federal reserve to counteract inflation.
Despite the high market low, the dollar index is on a dull start to 2023, against the major currencies the dollar managed to rose by 0.14% to 103.63.
On new years eve, the dollar index was down to 103.36 which is the highest low after hitting 114 during the final quarter of 2022. However, for the past few days, the dollar has been mostly flat.
The drop in the U.S Dollar index is also a result in response to the fresh number of U.S jobless claims, as several people around 1.710 million in mid-December claimed benefits from the labor department.
Central Banks Considered To Raise Interest Rates To Control Inflation
Up to this date, Federal Reserve has managed to raise a total of 425 basis points since March to tackle inflation. The U.S. central banks have hiked the interest rates by 75 basis points for four consecutive times and another hike of 50 basis points during the last month.
The investors of the country are clueless about the plans the federal reserve has stored up in their sleeves. Strategists and experts in the financial industry believe that they are expecting another 50 basis point hike by next month.
During the last meeting, the central banks discussed their plans to increase the interest rates further to regulate inflation. It is believed that the central banks have slowed down the usual frequent hikes as inflation is scrubbing off gradually.
Among the group of giant currencies around the world, the Japanese yen firmed sturdier at 130.6 against the dollar. The dollar fell to its lowest against Yen since June. though Japanese currency has lost around 12% of its value against the dollar in the past year.
However, rumors have been erupting about the Bank of Japan considering tightening its ultra-loose monetary policy after the central bank broadened the 10-year yield cap range on Japanese government bonds.
Another report from Nikkei implies that the Bank of Japan is considering combating inflation by rising its interest rates to show prices grow to a range of 2% in the financial years 2023 and 2024.
The Japanese currency is heading for its all-time highest against the dollar, with a rise of 8.1% after the decision made by the bank of japan. This is the first time since 2008 that the Yen held its head high in the crowd.
Meanwhile, other currencies, such as Euro have dropped by 0.07% to $1.065. During the past month, Euro has grown gradually.
According to the chief analyst Piert Haines Christianen, the Euro hike was driven by certain things mixed such as ECB commentary and high-interest rates in the U.S. in addition the hope of supply of natural gas for energy was not as bad as the situation of climate conditions.
The wages in the country are growing quicker than predicted pace, and the already high inflation must prevent further addition of interest rates.
Whereas in china, the surge of further covid rates has trapped the market’s growth and the news of easing the covid restrictions and reopening its borders has backlashed the US dollar leading it to stumble by a little.
Experts claim that china can help overall growth on a global scale and ease global inflation with the assistance of other great nations.