Surging dollar roils currencies

The prospect of aggressive Federal Reserve monetary tightening lifted a dollar gauge to another record Wednesday, hurting stocks and commodities and sparking efforts in Asia to stem currency weakness.

An Asian equity gauge slid to levels last seen in the pandemic fallout of 2020, European futures shed about 1 percent and S&P 500 contracts retreated.

In Japan, the yen sank 1 percent and officials warned they are concerned about rapid, one-sided moves. China, meanwhile, set its yuan reference rate with the strongest bias on record — a signal of discomfort with a swooning currency.

Greenback strength stoked by higher Treasury yields and worries about the economic outlook is rippling across the world, leading to tighter financial conditions that could further undermine risk assets.

The 30-year US Treasury yield was around the highest since 2014 amid a bond selloff exacerbated by bets on another 75 basis points Fed interest-rate hike to tackle high inflation. The Bank of Japan said it would boost scheduled bond purchases as the nation’s 10-year rate neared the 0,25 percent upper limit.

Aside from tightening monetary settings and an apparently unstoppable dollar, markets are also contending with a debilitating energy crisis in Europe and Covid lockdowns in China. Concerns are growing about the outlook for company earnings given the various global economic headwinds.

“Many investors are walking on egg shells,” Kristina Hooper, chief global market strategist at Invesco, said on Bloomberg Television. “The real issue is that it could be a one-two punch.

We could see the Fed continuing to pummel the economy with a significant rate hike, lets say 75 basis points, and then of course we get downward revisions to earnings that are significant.”- Bloomberg

You Might Also Like

Comments

Take our Survey

We value your opinion! Take a moment to complete our survey