The dollar weakened near its six-week low against the yen after investors interpreted the contraction in the US economy as another reason the Fed stepped off its tightening pedal.
The Department of Commerce’s preliminary estimates released on Thursday showed that the U.S. gross domestic product (GDP) contracted at an annualized rate of 0.9% in the second quarter.
This was due to a 1.6% decline in the first quarter.
Financial markets currently have a 76% chance that the Fed will slow rate hikes by 0.5 percentage points at its next meeting in September, and a 14% chance of a third consecutive 75 basis point hike.
The dollar traded at 134.39 yen, rebounding 0.13% after an overnight plunge of 1.74%, its highest since March 2020.
It reached its lowest level on Thursday at 134.2, the lowest level since June 17.
Long-term Treasury yields in Tokyo on Friday stayed at around 2.67%, falling over the next three days.
The dollar index, which measures currencies against the top six currencies, rose 0.03% to 106.25 after falling 0.28% to a three-week low of 106.05 on Thursday.
Ray Attrill, Head of FX Strategy at National Australia Bank, said: “Low yields and positive risk sentiment are (a) tried and credible ways to weaken the USD.” Sydney wrote in a customer note.
He warned that, as many analysts did this week, “the market’s conclusion that the Fed has lost some hawkishness is controversial.”
The GDP data comes a day after the Fed promised to raise interest rates by 75 basis points as expected and not hesitate to fight the worst US inflation since the 1980s. A stagnant job market.
Fed Chairman Jerome Powell said on Wednesday he does not believe the US is in a recession given the strength of the labor market.
Economists see the second straight quarter contraction as a sign of a technical downturn.
But in the United States, the National Bureau of Economic Research is the mediator of the recession. We define a recession as “a significant decline in economic activity that is widespread throughout the economy, a decline lasting more than a few months, usually seen in production, employment, and real income”. , and other indicators.”
Meanwhile, the euro remained flat at $1.01945, which closed almost unchanged after Thursday’s seesaw session.
Europe faces its own recession risk amid the continuing energy crisis.
The International Monetary Fund (IMF) warned this week that the region could face zero economic growth next year if Russia cuts gas supplies to Europe completely by the end of the year.
Sterling fell 0.09% to $1.21725, recovering from Thursday’s high of $1.21915, its highest since June 29.
Australia fell 0.09% to $0.69985, breaking from the high of $0.70135 since June 17 reached on Thursday.
Bitcoin stayed at around $23,851 after a two-day rally. A push above $24,280.30 is the highest since June 13th.
US Fed delays rate hike, dollar falls to six-week low – SABC News
Source link US Fed delays rate hike, dollar falls to six-week low – SABC News