The dollar remained stable on Monday, before the Federal Reserve’s January strategy meeting later this week. Bitcoin remained battered, nearing a six-month low record over the weekend. This was due to a drop in the value of technology stocks.
In a morning statement, HSBC’s co-head of Asian macroeconomic research, Frederic Neumann, remarked that the Fed has the markets by the scruff of their necks. It will pull and drag again this week.
Efforts to forecast when and how soon central banks will increase interest rates and end stimulus programs started remains a question. It is when COVID-19 occurred are currently a prominent factor influencing currency markets.
“What will make investors nervous is whatever advice Chair Powell may give at his media briefing. It is all about quantitative adjustment later in 2022,” Neumann said. He indicates that he did not foresee a change in policy.
Meeting Predictions
On Tuesday, the Federal Open Market Committee, which sets interest rates, begins its two-day meeting, with certain experts speculating that it may happen. It is improbable, though, that interest rates will be raised for the first time since the pandemic started.
“The larger risk, in our opinion, is if the FOMC’s announcement depicts a sense of urgency to act quickly. It focuses in the wake of extremely high inflation. The pressure could lead to a decision to halt monetary stimulus. This is more likely to happen by the middle of February” an economists at the Commonwealth Bank of Australia stated.
A bullish statement and a faster end to the QE programme could even encourage markets to price a 50bp rate hike in March. This would lead to a knee-jerk reaction higher in the dollar they added.
Rise of The Dollar
The dollar index, which measures the greenback against six major peers, was steady at 95.682 on Monday morning.
Also on the traders’ agenda, this week is the Bank of Canada’s January meeting. Wrapping up just before the Fed, where a rate hike is a possibility, and Australian inflation data due Tuesday. This will guide the Reserve Bank of Australia’s stance at its meeting next month.
The Australian dollar was trading around $0.7180 on Monday morning, at the bottom of its recent trend. Late last week, speculators unloaded risky assets including equities and even risky investments like cryptocurrencies. This caused the risk-friendly currency to fall.
Bitcoin was trading at $36,026, down 10% from Friday and down to $34,000 on Saturday, its lowest point since July 2021.
Since November, when it hit a record high of $69,000, the world’s largest virtual currency has virtually halved in worth. Most digital assets were damaged by the sell-off. Ether, the world’s second-largest virtual currency, was at $2,516 on Saturday, having touched its lowest value since July, which was $2,300.
Traders believe that as corporate investors increase their investment in cryptocurrencies, their movements will become more closely related to those of other risky assets. The Nasdaq Composite (IXIC) fell 7.55 percent last week, reaching its lowest level since March 2020.
In traditional foreign exchange markets, the sterling was trading at $1.3551, close to a two-week low, and the euro was trading at $1.1333.
The yen was at the upper limit of its current trend, with one dollar trading at 113.7 yen, not far from its 10-day high of 113.47. The dollar would hit a five-week low if it fell below that level.
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