U.S. Dollar Spikes Higher As Fed's Brainard Signals Aggressive Quantitative Tightening
05 Abril 2022 - 11:26PM
RTTF2
The U.S. dollar drifted higher against its most major
counterparts in the Asian session on Wednesday, following comments
from Federal Reserve Governor Lael Brainard indicating that the
central bank could begin reducing its balance sheet at a rapid pace
as soon as May and that an aggressive tightening of monetary policy
would be required to control inflation.
The Fed "will continue tightening monetary policy methodically
through a series of interest rate increases and by starting to
reduce the balance sheet at a rapid pace as soon as our May
meeting," Brainard said on Tuesday.
Amid strong recovery, the Fed is expected to trim the balance
sheet considerably more rapidly than in the previous recovery, with
significantly larger caps and a much shorter period to phase in the
maximum caps compared with 2017-19, Brainard added.
Brainard's comments sent the yield on the 10-year treasury note
to a multi-year high of 2.567 percent overnight.
The Fed minutes due later today could offer more clues about the
pace of rate hikes and balance sheet reduction.
The greenback climbed to 1.3045 against the pound, its strongest
level since mid-March. Against the euro, it touched a fresh 4-week
high of 1.0874. The greenback is seen finding resistance around
1.28 against the pound and 1.06 against the euro.
The greenback was up against the franc, at an 8-day high of
0.9341. On the upside, 0.95 is seen as its next resistance level.
The greenback touched a 2-day high of 1.2510 against the loonie, up
from yesterday's close of 1.2482. The greenback may face resistance
near the 1.28 level.
In contrast, the U.S. currency retreated from its early highs of
0.7562 against the aussie and 0.6934 against the kiwi and was
trading at 0.7593 and 0.6963, respectively. The currency is likely
to face support around 0.78 against the aussie and 0.72 against the
kiwi.
The greenback held steady against the yen, after having eased
from an 8-day high of 124.05 seen at 10:30 pm ET. The pair had
closed yesterday's deals at 123.60.
Looking ahead, U.K. construction PMI for March and Eurozone PPI
for February are due in the European session.
Canada Ivey PMI for March will be featured in the New York
session.
The Fed minutes from the March 15-16 meeting are set for release
at 2:00 pm ET.
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