Australian dollar crushed as Fed fails Warshach test
DXY roared as the Fed hiked. AUD was crushed. Oil eased but still looks poised. Woe is gold. No immediate growth worries in metals. Big miners on the other hand… When the Fed hikes, EM panics. Junk spreads are warming up for a legit puke. The long end rallied a little, but Fed dovishness The post Australian dollar crushed as Fed fails Warshach test appeared first on MacroBusiness .
The US dollar reached a seven-week high on Thursday following the Federal Reserve's decision to increase interest rates and signal further hikes in the months ahead. Investors were eagerly awaiting decisions from the Bank of England and Bank of Japan later in the week. The dollar surged alongside US Treasury yields, as the newly appointed Fed chief Kevin Warsh echoed the unanimous decision and expressed a more hawkish tone than anticipated.
Warsh's guidance on future interest rate hikes caught market participants off guard, leading them to reprice policy higher and subsequently boosting the dollar. Analyst Carol Kong from Commonwealth Bank of Australia noted that the dollar's appreciation is driven by the Federal Open Market Committee (FOMC) outlook. The euro weakened to $1.1456, near a seven-week low, while the British pound held steady at $1.3377 ahead of the Bank of England's meeting.
The Japanese yen hovered near a two-week low at 156.20 per dollar, as traders awaited the Bank of Japan's decision on Friday. The dollar index, which gauges the greenback against a basket of currencies, hit its strongest level since July 31, closing at 100.33. Rate futures markets now indicate a 90% probability of an additional quarter-percentage-point Fed rate hike by the end of the year, according to CME Group's FedWatch Tool.
Attention is now turning to the Bank of Japan, which is poised to raise interest rates to a 31-year high on Friday and signal its commitment to further cost-of-lending hikes. Market observers will closely monitor any clues from Bank of Japan Governor Kazuo Ueda regarding the timing and pace of additional increases. The Bank of Japan's stance could prove a critical test for the yen, which had previously surged to a seven-month high against the dollar last week as speculative positions shifted to net-long bets on the BoJ's policy-tightening trajectory.
Japanese retail investors, however, have continued to hold onto short positions, anticipating that the yen's recent gains would be fleeting. Meanwhile, Bitcoin traded flat at $76,562.25.
Written by urgent.news from CNA - Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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- IMF downgrades Australian economic forecast amid fears of interest rate hike theguardian.com
- Hawkish Fed lifts dollar to seven-week high as focus turn to BOJ brecorder.com
- Euro weakens to near 1.1450 as Fed raises rate for first time in three years fxstreet.com
- Hawkish Fed lifts dollar to seven-week high as focus turn to BOJ nst.com.my
- Hawkish Fed lifts dollar to seven-week high as focus turn to BOJ freemalaysiatoday.com
- BOJ faces higher bar to support yen after Fed’s hawkish hike businesstimes.com.sg
- BOJ faces higher bar to support yen after Fed’s hawkish hike japantimes.co.jp
- Hawkish Fed lifts dollar to seven-week high as focus turn to BOJ channelnewsasia.com
