USD Rose as Federal Reserve may Begin Asset Tapering on 2021

On Thursday, August 19, USD rose as investors anticipated the Fed to begin asset tapering this year. While the Kiwi dollar fell due to New Zealand’s sudden lockdown.

The USD Index, which trails the greenback in opposition to its six other rival currencies, inched up 0.35% to 93.472. 

This is the highest since November 5, 2020, before it traded 0.26 up at 93.464.

On Wednesday, the Federal Open Market Committee released the minutes of its July 27-28 meeting.

Fed policymakers saw some possibility to ease the central bank’s bond-buying stimulus as early as this year if the economic recovery continues.

However, the substantial further progress condition over maximum employment has not been met.

An analyst stated that one should note that the Fed committee’s latest meeting happened before the July non-farm payrolls report where jobs spiked to 943K.

Due to this, he added that most analysts stick to their prediction that the FOMC might announce tapering next month.

Then, they also expect that the implementation will take place in October or November this year.

Another analyst said that a decrease in debt purchases gives a positive outlook for the USD.

It is because the Federal Reserve will not inject too much money into the country’s financial system.

Now, analysts, economists, and investors eye the annual central bankers’ conference in Jackson Hole, Wyoming this month the 26th to 28th. 

A Westpac strategist commented as he projected that Fed policymakers would continue to give steps towards normalization of policy.

Therefore, this will provide crucial underlying assistance to the USD.

Meanwhile, most major currency exchange rates over the USD fell.

Exchange Rates over USD

The NZD/USD crashed 0.71% to 0.0049 as the Reserve Bank of New Zealand delayed its plan to raise its interest rate. 

This is amid Prime Minister Jacinda Ardern’s sudden announcement of an intense lockdown over one COVID-19 case.

Likewise, the risk-sensitive AUD/USD sharply fell 0.96% to 0.0069 as it stays on its four-month downtrend.

An analyst said that this is partly due to the country’s surging coronavirus delta variant outbreak.

However, Australia’s employment change and the unemployment rate for July were better than expected at 2,200 and 4.60%, respectively.

Moreover, the EUR/USD and the GBP/USD both declined 0.21% to 1.1687 and 0.49% to 1.3689, respectively.

Then, the USD/JPY shed 0.08% to 109.67 and the USD/CHF slid 0.03% to 0.9167, respectively.