August 14, 2022
  • August 14, 2022

Dollar surges ahead of Jobs ADP post by

By on October 6, 2021 0

© Reuters.

By Peter Nurse – The dollar traded higher on Wednesday as the safe haven spurred on fears that higher energy prices could translate into higher inflation, prompting the Federal Reserve to tighten monetary policy quickly .

At 3:05 am ET (0705 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% higher at 94.188, just below the 94.504 level seen last week, its highest level since September 2020.

rose 0.3% to 111.72, a one-week high, fell 0.1% to 1.1581, just above last week’s 14-month low of 1.1563 , fell 0.1% to 1.3611, while risk sensitivity fell 0.4% to 0.7261.

Equally interesting, it fell 0.5% to 0.6925 after raising its official key rate for the first time in seven years earlier on Wednesday, and hinted at further interest rate hikes coming in order to control the rise in inflation. It happened a day after Romania became the last central bank in emerging markets in Europe to hike rates.

This hawkish tone has added to expectations that the Federal Reserve will begin to cut back on asset purchases this year and prepare for a rapid rise in interest rates to the lows of the pandemic era.

The dollar also benefited from the rise in bond yields, with investors worried about the lack of agreement in the US Congress on the country’s debt ceiling and the possibility of default.

In addition, concerns remain about the Chinese real estate industry, with news that another Chinese real estate developer, Fantasia, has also failed to repay $ 205 million in bonds, suggesting concerns extend far beyond of Evergrande.

“Ultimately, it’s probably a reminder that the headwinds against risk sentiment emanating from China’s real estate sector are far from over,” ING analysts said in a note. “In FX, we believe this will continue to provide reasons not to turn the dollar lower.”

Attention now turns to the release of the press release later Wednesday, as a guide to Friday’s important official employment report.

The ADP number is expected to increase by 428,000 jobs in September, against 374,000 jobs the previous month, while that of Friday is expected to increase by 488,000 jobs, against 235,000 jobs added the previous month.

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