The dollar is getting cheaper because the Federal Reserve has abandoned the idea of bigger rate increases in the future.
The dollar index rose on May 4 against a basket of the world’s major currencies by 0.9% after the Fed raised rates by 50 basis points to 0.75-1.0%. This was reported by Reuters on Thursday, May 5th.
Expectations of a Fed rate hike have weighed heavily on markets this year and pushed the dollar higher. Compared to a basket of its competitors this year, it has risen by more than 7%.
But the dollar weakened after the Fed announced its decision to raise interest rates by 50 basis points. Hedge funds cut extended long positions after Fed Chairman Jerome Powell told reporters he was not considering a 75 basis point increase in the future.
And while the 75 basis point hike will no longer be discussed at the Fed meeting in June, inflation data and the direction of Russia’s war with Ukraine will determine the Fed’s next decisions, Mirabaud analysts said.
Earlier, US President Joe Biden said the war in Ukraine had led to rising prices. Russia’s aggression raises the price of gas and food around the world.
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Source: korrespondent
