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- Dollar index at two-decade high
- The euro retreats to two-decade lows
- Putin announces a partial mobilization of troops for Ukraine
- Markets assess Fed hawkishness at Powell’s briefing
LONDON/NEW YORK, Sept 21 (Reuters) – The dollar rose to a new two-decade high on Wednesday just ahead of another aggressive rate hike by the Federal Reserve, as investors fled for safety after of Russian President Vladimir Putin’s decision to mobilize. more troops for the conflict in Ukraine.
Putin on Wednesday called up 300,000 reservists to fight in Ukraine and said Moscow would respond with the full force of its vast arsenal if the West pursued what he called its “nuclear blackmail” over the conflict there. Read more
The news pushed the dollar index, which measures the dollar’s value against six major currencies, to 110.87 <=USD>its strongest level since 2002.
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The dollar index has risen nearly 16% this year and was set for its biggest annual gain since 1981. It last traded at 110.71, up about 0.5% the day.
“Most of the moves in the dollar today are Putin-related,” said Steven Englander, head of global G10 currency research and North America macro strategy at Standard Chartered in New York.
“When I look at my table, the five worst-performing currencies are the Swedish krona, the Polish zloty, the Czech koruna, the Hungarian forint and the euro. This is more of a concern for Putin because of signs that Russia could escalate the conflict in Ukraine and with what limits. puts the weapons they use.”
The dollar index is at a two-decade high ahead of the Fed
European currencies took the brunt of the sell-off in foreign exchange markets as Putin’s comments heightened concerns about the economic outlook in a region that has already been hit hard by Russia’s pressure on gas supplies to europe
The euro fell to a two-week low of $0.9885, on the heels of two-decade lows hit earlier this month. It was last down 0.7% at $0.9901.
Sterling fell to a fresh 37-year low of $1.1304 and was last down 0.5% at $1.1335.
Later on Wednesday, the Fed is expected to raise interest rates by three-quarters of a percentage point for the third time in a row and signal how much more and how fast borrowing costs can rise to control inflation. Read more
The policy decision, expected at 1800 GMT, will mark the latest move in a synchronized policy shift by global central banks that is testing the resilience of the global economy and the ability of countries to manage exchange rate shocks as the value of the dollar rises.
“What the market is looking for is if (Fed Chairman Jerome) Powell says the Fed doesn’t know how far they have to go and they will go as far as they have to,” said Standard Chartered’s England.
“If somebody asks him if he sees rates going up to 5% and he says he doesn’t see it, but doesn’t rule out whether that’s necessary to reduce inflation, that would be very crazy and it means they’re opening up to raising rates to a range even higher than the market anticipates.”
Meanwhile, the Australian and New Zealand dollars hit multi-year lows. The Australian dollar hit a low of US$0.6655, its lowest since June 2020, while the New Zealand currency fell to $0.5873, its lowest since April 2020.
Faced with a battered yen, the dollar rose 0.2% to 143.97, holding recent 24-year highs.
“It was interesting to me that the dollar/yen fell on news of the announcement, which could signal a return to the yen’s safe-haven credentials that have been absent for much of the year,” he said. said Colin Asher, senior economist at Mizuho Corporate. bank
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Forex bid prices at 10:42 (1442 GMT)
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Reporting by Dhara Ranasinghe in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Lucy Raitano; Editing by Edwina Gibbs, Catherine Evans and Mark Heinrich
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