Dollar down, but near one-year high

by Jonathan Adams
Dollar down

The U.S. Dollar Index dropped 0.07% to 94.287 after reaching the 94.435 level on Wednesday, for the first time since September 2020

The dollar was down on Thursday morning in Asia, but was near a one-year high as the U.S. Federal Reserve prepares to begin asset tapering in November 2021.

The U.S. Dollar Index dropped 0.07% to 94.287 by 3:38 AM GMT. It reached the 94.435 level on Wednesday, for the first time since September 2020.

The USD/JPY pair dropped 0.09% to 111.85.

The AUD/USD pair added 0.42% to 0.7205 and the NZD/USD pair gained 0.20% to 0.6884.

The USD/CNY pair advanced 0.01% to 6.4710. Chinese economic data released earlier in the day showed that September’s manufacturing purchasing managers index (PMI) was at 49.6. The non-manufacturing PMI and the Caixin manufacturing PMI were at 53.2 and 50 respectively.

The GBP/USD pair rose 0.25% to 1.3455. However, concerns remain about soaring natural gas prices alongside petrol shortages in the U.K. that have lasted nearly a week.

The safe-haven dollar saw a bid over concerns that the Fed could start tapering in a period of slowing global economic growth and persistently high inflation. It also got a boost as an impasse over the U.S. debt ceiling that threatens to shut the government down continues.

King U.S. dollar is in the house, it doesn’t matter the currency, just buy dollars has been the vibe, Pepperstone head of research Chris Weston said in a note.

We’re effectively seeing both the left and right side of the U.S. dollar ‘smile’ theory [which says that the dollar does well in good times or bad times for the U.S. economy, but not in between] working in earnest, with “stagflation concerns” on the rise and the Fed making it clear that it will begin asset tapering in November 2021 and investors pricing interest rate hikes in December 2022, the note added.

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