Fed’s Testimonies Signal Insight on Currency Movements

Fed’s Testimonies Signal Insight on Currency Movements

Investors are now awaiting clues on monetary policies from the U.S. Federal Reserve Chair’s testimony to the Congress after the dollar rose on Wednesday morning in Asia.


By 11:21 PM ET, the Dollar Index had risen 0.15 percent to 104.377. (3:21 AM GMT). After reaching 136.71 in early trade, the lowest level since October 1998, the USD/JPY pair dropped 0.35 percent to 136.13. The yen declined last week because the Bank of Japan maintained its ultra-low interest rates and pledged to uphold its yield curve control (YCC) strategy. Shunichi Suzuki, the finance minister for Japan, stated on Tuesday that he was concerned about the sudden decline in the value of the yen and would if required, react to exchange market movements.


Market Remains Uncertain

According to Redmond Wong of Saxo Markets Hong Kong, the Dollar/Yen is still trading on Treasury rates, which have been consistent but with the 10-year holding over the 3.20 percent barrier while the Bank of Japan has done a lot to protect YCC. The USD/NZD pair decreased by 0.87 percent to 0.6274, and the USD/AUD pair down by 0.71 percent to 0.6920. Iron ore’s low price and other low commodity prices kept the Australian dollar under pressure. While the GBP/USD pair’s price nudged down 0.27 percent to 1.2238, the USD/CNY pair increased 0.37 percent to 6.7145.


Investors will be watching for additional hints on whether the Fed will deliver another 75 basis point interest rate rise when Fed Chair Jerome Powell begins his two-day appearance to Congress later in the day. According to Thomas Barkin, president of the Fed Bank of Richmond, the central bank should raise interest rates as quickly as possible without adversely impacting the economy or financial markets. Philip Lane, the chief economist at the European Central Bank, said in other statements that the ECB will increase interest rates by 25 basis points at its meeting in July but that it is uncertain how much it will increase rates in September, hinting at the possibility of a larger 50 basis point increase.


Elon Musk, CEO of Tesla (NASDAQ: TSLA) Inc., has warned that the United States is approaching a recession because of the Fed’s aggressive monetary policy, which has raised fears about slowing economic development.