The dollar rose to its strongest level of the year against rival currencies, despite concerns that the Federal Reserve would begin to withdraw policy support and Republicans would continue to block Democrat efforts to raise the debt limit, threatening to overwhelm the government. Will go a shutdown.
The dollar index – which measures the US dollar relative to a basket of foreign currencies – hit an 11-month high of 93.83 on September 29.
The euro fell to $1.1660, its lowest level since November 2020, while the British pound fell to $1.3514, its lowest level since January.
Earlier this week, the Bank of England warned that UK inflation could exceed 4 per cent later this year, while two policymakers called for an early end to the central bank’s quantitative easing program due to rising price pressures. called upon.
Elsewhere, the yen, which is sensitive to US yields as higher rates could attract inflows from Japan, hit an 18-month low of 111.34 per dollar.
The yen was not reacting much to the news that Fumio Kishida is set to become the next prime minister of Japan, after being elected leader of the country’s ruling Liberal Democratic Party (LDP), virtually ensuring his position.
The 64-year-old has called for a stimulus package worth more than 30 trillion yen ($269 billion) to tackle the pandemic.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.76 per cent, followed by Australia by 1.08 per cent and South Korea by 1.22 per cent.
The Hong Kong benchmark was up 0.67 percent, despite the collapse of Chinese property company Evergrande and rising investor anger about the country’s real estate clout. Chinese blue chips were down 1.02 percent.
“We expect the USD to continue to gain strength for the rest of the year … and that’s just because of the outlook for policy tightening,” Kimberly Mundy, a strategist at the Commonwealth Bank of Australia, told Reuters. rates by the end of 2022.
US Treasury yields have jumped higher in recent days, after the Fed indicated it could reduce the unprecedented support it has provided for the economy during the pandemic earlier than expected.
The Fed indicated that it may begin raising its benchmark interest rate in 2022 and expects to begin cutting back on its monthly bond purchases before the end of the year.
Traders are now turning their attention to governments and central banks around the world for indications of when they will roll back the massive emergency packages launched amid the COVID-19 pandemic.
Meanwhile, US Senate Republicans on September 28 blocked a bid by Democrats to raise the debt limit.
Federal funding is due to expire on 30 September and the right to borrow is due to expire around 18 October. Without the increase in the debt limit, the US government would default for the first time in its history.
Reuters contributed to this report.
This News Originally From – The Epoch Times