NEW DELHI (CoinChapter.com) — The U.S. dollar’s rally is weakening, with the WSJ Dollar Index (a measure of the dollar’s value relative to a basket of foreign currencies) falling nearly 3% from its May 12 high of 96.95 as it reached 94.09 on May 30.
The WSJ dollar index fell after reaching a multi-decade high in May. Source: WSJ Markets
However, the currency strengthened over the last week as the index rose to 95.13 on Jun 6, exhausting a two-week downtrend. The dollar index’s recent rally led the currency to levels last seen in 2002.
Economic Landscape Might Suggest A Strong Dollar
As per the U.S. Bureau of Labor Statistics data, employers added 390,000 jobs in May, significantly above the 328,000 Dow Jones estimate. However, the number is down from Apr’s 436,000 and below the monthly average pace of growth in 2021.
Although the market seemed to be cooling down, investors would likely see May’s better than expected performance as a sign of a competitive job market.
Furthermore, market data suggests that American customers continue to spend money rapidly. Despite the data adding to the trends that propped the dollar’s rally over the past 12 months, some investors are worried the Federal Reserve might have to lower the rate of interest rate hikes.
In detail, investors prefer currencies from countries whose central banks have been raising interest rates recently. Dollar investors are relying on hopes that the Fed will raise interest rates by a percentage point during the Fed meeting in Jul.
Moreover, a strong dollar would make products made in the U.S. more expensive for foreign cutomers.=. As a result, U.S. multinationals, such as Microsoft, have had to report facing losses in recent reports.
Investors Looking For Signs of Slowing Dollar
Investors would likely analyze the consumer data and inflation numbers due on Friday to look for clues regarding the state of the dollar. Lower inflation data, for example, could see the Fed switching to a more restrained approach toward rate hikes.
As a result, the dollar might fall further if the Fed eases rate hikes in response to slowing inflation. The unemployment rate remained at 3.6%, more than the expected rate of 3.5%. In addition, average hourly earnings increased by 0.3% compared to the 0.4% forecast.
Moreover, the volatile foreign exchange market has investors looking to the Fed’s Sept meeting. Officials of the central bank remain nearly unanimous on the need for half-point increases during the Jun and Jul meetings.
“The market went through six weeks of thinking the sky’s the limit for the Fed. [Now,] I think the dollar has topped out.”
Steve Englander, head of North American macro strategy at Standard Chartered, told the WSJ
Traders believe the impact of tighter lending on the housing market might be another indicator to watch.
The sale of residential properties fell sharply in Apr 2022. Source: U.S. Census Bureau
The sale of new homes fell sharply in Apr, indicating higher interest rates hurt buyer demand. Additionally, with rising mortgage interest rates, home ownership has become expensive.
Constrained consumer spending and stock market volatility are other factors that investors believe might slow down the dollar.
A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.
Enabled by technology and access to some of the world's cheapest data, retail investors now account for over 45%...
Our Partners
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.