© Reuters. FILE PHOTO: US dollar banknotes are shown in this illustration taken on March 10, 2023. REUTERS/Dado Rović/Illustration/File photo
Written by Saqib Iqbal Ahmed
NEW YORK (Reuters) – The U.S. dollar rose against a basket of currencies on Thursday, a day after Federal Reserve Chairman Jerome Powell backed more U.S. interest rate hikes and as a series of interest rate increases by several central banks prompted… To fuel concerns about global growth.
Sterling was choppy, the Swiss franc fell and the Norwegian crown rose on Thursday after the Bank of England (BoE), Swiss National Bank (SNB) and Norges Bank raised their benchmark interest rates.
The interest rate hike comes a day after Fed Chair Powell told lawmakers on Capitol Hill that further rate hikes were a “good guess” of where the central bank would go if the economy continued in its current direction. Traders will be watching the second day of Powell’s testimony on Thursday.
which measures the currency against six competitors, rose 0.21% to 102.23. Against the yen, the dollar rose 0.5 percent to 142.645 yen.
The Australian dollar, seen as a liquid proxy for risk appetite, fell 0.48%.
“I think doom and gloom is back as a dominant narrative across the markets right now,” said Juan Perez, Director of Trading at Monex.
“It seems legitimate that while a full recession may not materialize, stagflation — low economic levels combined with stubborn inflation — is a tale to watch in the second half of the year,” Perez said.
US data on Thursday showed that the number of people filing for state unemployment benefits for the first time held steady at a 20-month high last week, and held high for the third week in a row in what could be an early indication of labor market weakness.
Up above and far away
Sterling fell 0.11% at $1.2754 in a choppy session after the Bank of England’s Monetary Policy Committee (MPC) voted 7-2 to raise its key interest rate to 5% from 4.5%, its highest since 2008 and its biggest increase since February. .
After inflation data stabilized at 8.7% in May, defying market expectations and making it the highest of any major economy, investors were divided over the size of the Bank of England’s new increase.
“They (the Bank of England) are trying to jump in the fight against inflation but at what cost? The mortgage market is contracting, the cost of living is not falling and Sterling will be caught in the crossfire,” Brad Picktel, global head of FX at Jefferies, said in a note.
The Swiss Franc fell 0.2% after the Swiss National Bank (SNB) raised its benchmark interest rate by 25 basis points to 1.75%, defying some market expectations for a larger increase.
Despite declining Swiss inflation, currently the lowest among G10 economies at 2.2%, SNB President Thomas Jordan recently reiterated his willingness to raise interest rates, encouraging markets to expect a 50 basis point increase.
“Unlike the ECB (European Central Bank) and the Federal Reserve (Federal Reserve), the SNB can go slowly and steadily tightening its monetary policy,” said Thomas Getzel, chief economist at VP Bank Group in Liechtenstein.
On the other hand, the Norwegian krone rose about 1% against the US dollar after the Bank of Norway raised its benchmark interest rate by 50 basis points to a 15-year high, more than expected by the majority of economists polled by Reuters. She said she is aiming for another increase in August.
In the crypto space, bitcoin was on track for a fourth straight day of gains after hitting its highest level since mid-April, buoyed by BlackRock’s (NYSE:) plan to create a bitcoin exchange-traded fund (ETF) even as the sector faced US regulatory scrutiny.