Dollar soars to two-decade high as Putin rattles forex ahead of Fed

Dollar soars to two-decade high as Putin rattles forex ahead of Fed

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  • Dollar index at two-decade high
  • Euro hits two-decade low
  • Putin announces partial mobilization of troops for Ukraine
  • Markets gauge Fed hardline in Powell report

LONDON/NEW YORK, Sept 21 (Reuters) – The dollar rose to a new two-decade high on Wednesday just before another expected aggressive Federal Reserve rate hike, as investors sought safety after the president’s move. Russian, Vladimir Putin, to mobilize. more troops for the conflict in Ukraine.

Putin on Wednesday called up 300,000 reservists to fight in Ukraine and said Moscow would respond with the power of its vast arsenal if the West pursued what he called its “nuclear blackmail” over the conflict there. read more

The news propelled the dollar index, which measures the value of the dollar against six major currencies, to 110.87. <=USD>its strongest level since 2002.

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The dollar index is up nearly 16% this year and is poised for its biggest annual rise since 1981. It last traded at 110.71, up about 0.5% on the day.

“Most of the moves in the dollar today are related to Putin,” said Steven Englander, head of global G10 currency research and North America macro strategy at Standard Chartered in New York.

“When I look at my table, the five worst performing currencies are the Swedish krona, the Polish zloty, the Czech koruna, the Hungarian forint and the euro. in Ukraine and within what limits”. he puts on the weapons that they use.”

Dollar index at two-decade high ahead of Fed

European currencies bore the brunt of the selling in foreign exchange markets as Putin’s comments exacerbated concerns about the economic outlook for a region already hit hard by the restriction of gas supplies to Europe by Russia.

The euro fell to a two-week low of $0.9885, on the back of two-decade lows hit earlier this month. The latest was down 0.7% at $0.9901.

Sterling fell to a fresh 37-year low of $1.1304 and was down 0.5% at $1.1335.

Later on Wednesday, the Fed is expected to raise interest rates by three-quarters of a percentage point for the third time in a row, signaling how much higher and how fast borrowing costs must rise to control inflation. read more

The policy decision, scheduled for 1800 GMT, will mark the latest move in a synchronized policy shift by global central banks that is testing the resilience of the global economy and the ability of countries to manage crises. exchange rates as the value of the dollar soars.

“What the market is looking for is if (Fed Chairman Jerome) Powell says the Fed doesn’t know how far it has to go and will go as far as it needs to go,” Standard Chartered’s Englander said.

“If someone asks him if he sees rates going to 5% and he says he doesn’t see it, but he doesn’t rule out if that’s necessary to bring down inflation, then that would be really aggressive and it means they’re opening up raising rates to a range.” even higher than what the market anticipates.

Meanwhile, the Australian and New Zealand dollars hit multi-year lows. The Australian dollar hit a low of US$0.6655, its lowest level since June 2020, while the New Zealand currency fell to US$0.5873, its lowest level since April 2020.

Against the battered yen, the dollar rose 0.2% to 143.97, holding off 24-year highs.

“I was interested that the dollar/yen fell on news of the announcement, which could signal a return of the yen’s safe-haven credentials that have been absent for much of the year,” said Colin Asher, senior economist at Mizuho Corporate. Bank.

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Currency bid prices at 10:42 am (1442 GMT)

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Reporting by Dhara Ranasinghe in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Lucy Raitano; Edited by Edwina Gibbs, Catherine Evans, and Mark Heinrich

Our standards: the Thomson Reuters Trust Principles.

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