Data showing a surprising boost in the U.S. services sector in July and hawkish remarks from Federal Reserve officials this week helped the U.S. dollar gain ground versus the yen on Wednesday.
The non-manufacturing PMI, according to the Institute for Supply Management, improved from June to July. The uptick put a stop to three consecutive monthly falls. Additionally, it supported the idea that there is no recession by demonstrating that supply constraints and pricing pressures had subsided. On Wednesday, Fed members reiterated their commitment to containing rising inflation. At the same time, one said that a half-point increase in the benchmark interest rate of the U.S. central bank next month could be sufficient to make progress in that direction.
The dollar strengthened on Tuesday as three Fed members said that the institution is still “fully unified” in its decision to raise interest rates to a level that will significantly slow the greatest pace of inflation in the country since the 1980s.
Experts Warn Further Movement in Currency Markets
According to experts, the tone for the dollar will also be set by U.S. monthly employment figures coming on Friday. The dollar index, which compares the dollar value to six important rivals, was recently almost unchanged at 106.40. Before the report, the index had been lower. The dollar index, which has gained significantly this year, has recently retreated as investors have begun reevaluating how aggressively the Fed may raise interest rates.
The dollar recently traded up 0.6 percent against the yen at 134.05 yen. Button claimed that the yen’s safe-haven reputation is weakening. The dollar serves as both a growth engine and a shelter for investors. Given the monetary policy status, those dollar gains this year are supercharged.
According to observers, tension following the highest-level U.S. visit to Taiwan in 25 years may also bolster the U.S. dollar. Speaker of the House Nancy Pelosi’s visit was denounced by China, which also started six days of military exercises around Taiwan. Pelosi quickly visited Taiwan and pledged support for the United States before departing on Wednesday. The last trading price of the euro against the dollar was $1.0165.