Dollar Rises on Fed Policy Meeting Results of Rate Hikes in 2023

17 June 2021

    The dollar gained in early European trade Thursday, reaching its highest levels in two months after the Federal Reserve concluded its two-day policy meeting, which delivered a timetable for raising interest rates in 2023.

     

    The US Federal Reserve said it would maintain the current levels of interest rates and monthly bond purchases, but new projections showed 11 of 18 central bank policy makers’ plan for two interest rate increases of 25 basis points in 2023 - a year earlier than expected - a surprising change from the previous meeting when none of these officials were looking for hikes during that year.

     

    “With the world’s so-called ‘smartest market’ expecting a quicker and more aggressive liftoff in interest rates, the fallout from this Fed meeting could continue to drive all markets in the days and weeks to come”, Matthew Weller - Global Head of Market Research at GAIN Capital commented.

     

    With inflation soaring and the economy recovering quickly from the pandemic, the market had been expecting the Fed to discuss a timetable for reining in its massive bond-buying program, so the turn took many by surprise.

     

    The Dollar Index, which tracks the greenback against a basket of six other currencies, was traded 0.2% higher at 91.418 by 07.55 GMT, after surging nearly 1% overnight - its biggest rise since March of last year.

     

    The benchmark 10-Year Treasury yield was at 1.581%, after rallying to as high as 1.5940% from 1.4820% on Wednesday.


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