Dollar to experience big weekly gain on Covid-19 and inflation concerns

Editor: Peter Nurse

investing. com – The dollar was mostly calm in the European session on Friday and will have experienced a weekly increase due to the increasing Covid-19 events around the world and the search for a safe harbor. High inflation in the US also raises expectations that the Fed will reduce its monthly bond purchases of 120 billion dollars in a shorter time.

Measures the performance of the US dollar against a trade-laden basket of 6 major currencies. US dollar index saw calm process at 92,620, If it continues on its way to close the week with 0.5% gain, it will have experienced the biggest weekly percentage increase in a month.

EUR/USD declines slightly to 1.1808 GBP/USD down to 1.3822. AUD/USD is up 0.1% at 0.7435 but is down 0.7% on a week-on-week basis.

Bank of Japan did not change the interest rates and USD/JPY rose 0.1% to 109.98. However, the bank reduced the current year’s growth rate, which it had predicted as 4.0% in April, to 3.8%.

Increasing number of incidents in Southeast Asia, Europe and the USA also supported the dollar, causing many investors to avoid risk.

In Australia, Melbourne also joins Sydney with quarantine: that is, 40% of the population is subject to restrictions. According to a minister, Indonesia is now grappling with the “worst scenario” in the epidemic. South Korea, which previously had success with Covid-19, is suffering from a new and permanent wave. Japan has declared a state of wonder in Tokyo – the upcoming Olympics will take place without an audience. Los Angeles has reintroduced the mask requirement in closed areas.

On the other hand, even though Fed Leader Jerome Powell tried to reduce the expectations that the central bank will tighten in a shorter time, the US dollar was supported by strong inflation numbers and the change in interest rate expectations after the Fed pointed out that there may be an interest rate hike in 2023, sooner than expected.

“The Fed is expected to start tightening quantitative easing later this year, and our economists are against lower-yielding G10 currencies (which central banks should be cautious about this and next year) when the hike cycle will begin in the second half of 2022 (with two rate hikes),” ING analysts said. He is of the opinion that the decrease in the dollar will be limited.”

on the other hand NZD/USD rose 0.5% to 0.7014. New Zealand’s second quarter CPI rose 3.3% year-on-year and 1.3% quarter-on-quarter.

The country’s central bank is now expected to raise interest rates in August, sooner than expected.

on the other hand South African rand rose 0.6% to 14.4697 amid signs that the wave of violence in the country may have subsided in recent days.

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