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Dollar Down, BOE and ECB Follow Fed’s Hawkish Lead While BOJ Stays Put

Forex Dec 16, 2021 10:33PM ET
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By Gina Lee

Investing.com – The dollar was down on Friday morning in Asia, remaining under pressure as investors digest a surprise interest rate hike from the Bank of England (BOE), and the European Central Bank (ECB) adopted a more hawkish stance.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.03% to 95.990 by 10:26 PM ET (3:26 AM GMT).

The GBP/USD pair inched up 0.06% to 1.3326, while the USD/JPY pair inched down 0.06% to 113.64.

The AUD/USD pair edged down 0.18% to 0.7170 and the NZD/USD pair was down 0.21% to 0.6783.

The USD/CNY pair inched up 0.04% to 6.3698.

Key central banks have adopted different policies as uncertainty about the omicron COVID-19 variant’s impact on economic recovery remains. The debate on the extent to which central banks should act to curb high inflation also continues.

The pound climbed as high as $1.33755 for the first time since Nov. 24 during the previous session, after the BOE hiked interest rates to 0.25% in a surprise move as it handed down its policy decision on Thursday. It is now the first key central bank to hike interest rates since the beginning of the COVID-19 pandemic.

Meanwhile, the euro steadied around the $1.13315 mark, after hitting its highest in December, or $1.13605. The ECB, in its own policy decision handed down on the same day as the BOE, announced plans toward asset tapering over the upcoming quarters. However, the central bank also emphasized policy flexibility.

"A cautious ECB taper and a surprise BOE hike likely leaves the dollar index heavy near-term, especially given lopsided long dollar positioning into year’s end," Westpac analysts said in a note.

"But weakness likely does not extend beyond the low 95s" for the dollar index, with the U.S. Federal Reserve "streets ahead" of the ECB in terms of the tightening cycle, and dips into the mid-95 level are a buying opportunity, the note added.

The Fed turned hawkish in its latest policy decision, handed down on Wednesday. The central bank will accelerate its asset tapering program to end in March 2022, while projecting three quarter-point rate increases that year.

In Asia Pacific, the Bank of Japan kept its interest rate steady at -0.10% as it handed down its policy decision earlier in the day. Although keeping within investor expectations, inflation still remains well below the central bank’s target.

Dollar Down, BOE and ECB Follow Fed’s Hawkish Lead While BOJ Stays Put
 

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Clinical Physiotherapy Dec 17, 2021 2:45AM ET
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