The dollar was higher on Wednesday’s forex trading, lifted by talks of higher U.S. interest rates. A selloff in tech stocks increased the greenback’s safe haven appeal.
U.S. Treasury Secretary Janet Yellen said at a virtual meeting on Tuesday that it may be that interest rates will have to rise somewhat. That is to make sure that their economy doesn’t overheat.
Even though the additional spending is relatively small relative to the size of the economy, she said. It could cause some very modest increases in interest rates, she added.
The Treasury Secretary later tried to row back on the significance of these remarks. However, the mere mention of U.S. tightening scared a market that has become so influenced by theU.S. central bank’s monetary stimulus.
Currencies Movements
The Dollar Index was up 0.4% at 91.308 at 2:55 AM ET (0755 GMT). The index strayed away from its recent two-month low of 90.422.
The EUR/USD pair traded down 0.1% at 1.2007. It headed back down to its key 1.20 pivot.
GBP/USD added 0.1% at 1.3893, with investors awaiting the Bank of England’s (BOE) policy decision on Thursday. USD/JPY gained 0.1% to 109.46, while the risk-sensitive AUD/USD inched up 0.1% to 0.7715.
This bounce in the dollar came after comments from Yellen suggesting rate hikes may be needed in the near future.
On Wall Street, the tech-heavy Nasdaq Composite slumped as investors abandoned the giant tech stocks. They worried that their valuations would be hit in a rising interest rates environment.
In the second half of the year, the bank targets 1.15-1.16 in EUR/USD.
Furthermore, USD/INR rose 0.3% to 73.95 after India’s central bank’s announcement of loan repayment relief. In addition, steps to boost credit to key sectors as the country struggled from the world’s worst outbreak of the pandemic.
The EUR/NOK pair was trading 0.1% lower at 10.0026. On the other hand, USD/NOK was unchanged at 8.3345 ahead of the latest policy-setting meeting by Norway’s central bank.
The Norges Bank is set to maintain its key rate at zero. It said that they are most interested in how they assess the latest vaccine news. Also, the outlook for the reopening of the Norwegian economy.
Nordea said this is clearly the most important factor for when the first rate hike will occur.
