© Reuters. Plastic letters arranged to read “Inflation” are placed on the US Dollar bill in this illustration taken, June 12, 2022. REUTERS/Dado Ruvic/Illustration
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By Saikat Chatterjee
LONDON (Reuters) – The US dollar slashed initial losses and held near 20-year highs on Tuesday while its euro-to-euro rivals struggled as traders braced for the fall. Positive rate hike from the Federal Reserve this week.
Expectations for a 75 basis point increase at the end of Wednesday’s two-day meeting are almost baked into prices, according to CME’s Fedwatch Tool with investment banks like Goldman Sachs (NYSE:) is expected to increase by 75 basis points in June and July, and by 50 basis points in September.
A 75 basis point gain would be the biggest gain since 1994, and with world stock markets plunging, the dollar’s appeal as a safe-haven is also boosting its appeal. its lead.
Kenneth Broux, strategist at Societe Generale, said: “There are no convincing signs of bargain hunting in riskier currencies or profit taking with long dollar long positions after release. fire yesterday… OTC 🙂 in London.
Friday’s red-hot inflation spurred the worst day for two-year US Treasuries since 2009; Combined with Friday’s post-CPI jump, yields have risen about 54 bps, the biggest two-day gain since shortly after the Lehman crash in 2008. Deutsche Bank (ETR:) said.
Brad Bechtel, global head of FX at Jefferies in New York, said: “75bps gets you to a place where they’ve pushed the anti-inflation regime to the next logical level amid consistently higher inflation. secular,” said Brad Bechtel, head of global FX at Jefferies in New York.
The widening of the spread in favor of the US boosted the greenback’s appeal while bearish long positions also helped keep traders active into long dollar trades.
Traders own just $12 billion, almost a quarter of the record set long ago at the start of the last US tightening cycle in 2015.
It hit a one-month high in the euro, Australian dollar, New Zealand dollar, Swiss franc and Canadian dollar and it hit a new one-month high of $1.0397 per euro on Wednesday Three, before a slight drop to $1.0475.
News of official intervention also gave the yen a brief respite, but it soon bounced back after the Bank of Japan extended a bond-buying round, sending yields on government bonds. 10 year term back to 0.25% limit.
It last traded at 134.40 per dollar after hitting a 24-year low of 135.22 on Monday. It fell to as low as 133.88 yen earlier.
