Dollar Down, but Near One-Year High as Fed Preps for Asset Tapering

By Gina Lee

Investing.com – The dollar was down on Thursday morning in Asia, but was near a one-year high as the U.S. Federal Reserve prepares to begin asset tapering in November 2021.

The that tracks the greenback against a basket of other currencies inched down 0.07% to 94.287 by 11:38 PM ET (3:38 AM GMT). It hit the 94.435 mark on Wednesday, the first time it has done so since September 2020.

The pair inched down 0.09% to 111.85.

The pair gained 0.42% to 0.7205 and the pair edged up 0.20% to 0.6884.

The pair inched up 0.01% to 6.4710. Chinese released earlier in the day showed that September’s purchasing managers index (PMI) was at 49.6. The PMI and the were at 53.2 and 50 respectively.

The pair was up 0.25% to 1.3455. However, concerns remain about soaring prices alongside petrol shortages in the U.K. that have lasted almost a week.

The safe-haven dollar saw a bid over concerns that the Fed could start tapering in a period of slowing global economic growth and persistently high inflation. It also got a boost as an impasse over the U.S. debt ceiling that threatens to shut the government down continues.

U.S. Senate Republicans blocked efforts by the Democrats to avert a potentially crippling U.S. credit default as federal funding expires on Thursday and borrowing authority on around Oct. 18.

“King U.S. dollar is in the house, it doesn’t matter the currency, just buy dollars has been the vibe,” Pepperstone head of research Chris Weston said in a note.

“We’re effectively seeing both the left and right side of the U.S. dollar ‘smile’ theory [which says that the dollar does well in good times or bad times for the U.S. economy, but not in between] working in earnest,” with “stagflation concerns” on the rise and the Fed making it clear that it will begin asset tapering in November 2021 and investors pricing interest rate hikes in December 2022, the note added.

Fed Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde spoke at an ECB forum on Wednesday alongside Bank of England and Bank of Japan Governors Andrew Bailey and Haruhiko Kuroda. The central bank chiefs said that they were keeping an eye on inflation, but were cautiously optimistic that the phenomenon will be temporary.

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