Dollar stands tall as Powell reappointment firms hawkish Fed bets

Hong Kong, Nov. 23 (BUS): The dollar approached a four-and-a-half year high against the yen on Tuesday, after Federal Reserve Chairman Jerome Powell’s reappointment for a second term encouraged bets on higher US interest rates. rates.

At 114.8 yen, the dollar came close to last week’s peak at 114.97; Its highest since March 2017, after jumping 0.77% on Monday.

The Japanese currency is sensitive to moves in US Treasuries and the two-year US Treasury yield rose 8.5 basis points on Monday to the highest level since early March 2020. The latest yield was 0.5924%.

US President Joe Biden chose Powell over the other leading candidate, Lyle Brainard, who is seen by markets as the more pessimistic of the two, although Brainard will be Fed Vice Chairman.

The news reinforced market expectations of higher interest rates next year when the central bank finishes scaling back its emergency bond-buying program.

Currency markets have been mostly driven by market perceptions of the various steps in which global central banks are reducing pandemic-era stimulus and raising rates.

“President Powell’s nomination for a second term will leave markets comfortable in rates in a Federal Reserve hike from July next year,” Westpac analysts said in a note. “At least three Fed officials have now publicly discussed accelerating tapering as well,” Reuters reported.

“In the meantime, virus suppression measures are being implemented in Europe once again, which constitutes a stark contrast,” they added.

The euro was down at $1,124, near a 16-month low, after losing 2.8% so far this month.

The common currency has been hurt by the European Central Bank’s cautious tone and, more recently, the resurgence of COVID-19 cases in Europe, forcing Austria to return to full lockdown on Monday and prompting Germany to consider tighter restrictions.

Sterling was also weak against the rampant dollar with 1 pound at $1.340.

A stronger dollar and lower oil prices weighed on commodity currencies.

The Australian dollar, also affected by the downbeat RBA outlook, was at $0.7228, near its lowest since early October.

The Canadian dollar has continued to slide this month. The dollar rose 2.5% against the Canadian dollar in November and the dollar was last at 1.2692.

Bitcoin has been stuck in the doldrums at $56,784 after having struggled after hitting a record high of $69,000 earlier this month.

“Many traders will be watching to see if it drops as low as $52,000, a level that is expected to be a price level where the market-leading cryptocurrency finds buyers,” analysts at crypto exchange OKEX said in a note.

HF