Dollar Rises to Two-Week High Amidst Fed Coming Policy and East Europe Tension

The US dollar has risen Tuesday morning in the Asian market as the global benchmark currency maintains its almost two-week high rate. Continuous worry over the pending Federal Reserve monetary policy, which market players are beginning to fear could come earlier than it was expected and with more stringent measures, as well as the possibility of a military confrontation between Russia and Ukraine, continues to increase steadily.

Market Rates

The American Dollar Index, which is the watchdog of the dollar, seeing how it compares against other fiat currencies, increased by 0.04% to 95.935 while the USD/JPY trading exchange went down to 0.17% to 113.72. The AUD/USD exchange was on the high trend with 0.03% to attain 0.7142.

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Data put out by Australia earlier in the day revealed that the country’s Consumer Price Index (CPI) increased by 1.3% for consecutive quarters and 3.5% for consecutive years by the fourth quarter of 2021.

The unexpected high numbers pumped up the argument for the Reserve Bank of Australia to increase interest rates in 2022, even though the Governor of the Australian Central Bank, Philip Lowe, has said that an increased interest rate is not a likely event to occur.

Nevertheless, realities in the money market do not entirely agree with the Reserve Bank of Australia’s position, and it is bracing for an increase in rate by June.

The Head of Forex Strategy at National Australia Bank, Ray Attrill, has said to news reporters that the available figures are obviously beyond what the Reserve Bank forecasted for inflation, therefore, the possibility that they will have to draw back on their previous role as guardians keep increasing by the day.

He said further that the figures merely validated the stance of the money markets, and that explicates why the Australian dollar lacked a steady rally.

Meanwhile, the USD/NZD exchange tumbled by 0.33% to reach 0.6676, and the USD/CNY also declined by 0.02% to reach 6.3297; likewise, the USD/GBP exchange declined by 0.06% to reach 1.3477.

Possible Ripple Effects

The Federal Reserve is expected to publish its monetary policy on Wednesday, and it will be carefully studied to know when to expect an increased interest rate and asset management policies. 

The money markets, however, are looking to have the first increase in March and three additional quarter increments by the end of the year.

According to Attrill, the possibility that the Federal Reserve will follow up a March interest rate increase with another one before their meeting in June is compelling, and there are fears that the market may have to re-price.

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