3 hrs ago
Dollar Rises as ECB Hike Pressures Euro
The European Central Bank raised interest rates to help slow rising prices.
After the increase, the euro became slightly weaker against the dollar.
The dollar also gained because U.S. producer-price data supported expectations of a Federal Reserve rate hike.
Investors were waiting for U.S. consumer-price data due the next day.
A stronger inflation reading could help the dollar rise further.
Oil prices jumped after concerns about shipping disruptions near Yemen and the Red Sea.
The yen weakened against the dollar but was still much stronger than before a late-July intervention.
Investors were also watching for a possible Bank of Japan rate hike the following week.
The European Central Bank raised interest rates by 25 basis points, its second increase this year.
The euro fell 0.19% against the dollar to $1.1612 after the ECB decision.
The dollar index gained 0.28% to 99.06, supported by U.S. producer-price data and rising oil prices.
Brent crude futures rose 6.3% to settle at $107.63 a barrel after concerns about Red Sea shipping disruptions.
The yen declined 0.50% to 154.32 per dollar but remained more than 6% stronger since late-July intervention.
- Who
- The European Central Bank, Federal Reserve, Bank of Japan, currency traders and analysts were central to the market moves.
- What
- The dollar rose, the euro slipped after an ECB rate increase, and the yen retreated from recent gains.
- Where
- Global currency markets, including the United States, Europe, Japan, China and markets affected by Red Sea shipping.
- When
- Thursday, September 10; U.S. consumer-price data was expected Friday, and a Bank of Japan rate hike was expected the following week.
- Why
- The dollar was supported by U.S. producer-price data and oil-price gains, while the euro was pressured by concerns about the economic effects of further ECB rate increases.
Rate Hike and Dollar Drivers
Economic and Market Risks
Effect of the ECB increase
Rate Hike and Dollar Drivers
The rate increase was widely expected and reflected policymakers’ effort to tame energy-driven inflation.
Economic and Market Risks
Markets worried that additional rate increases could damage economic activity, contributing to the euro’s decline.
Outlook for the dollar
Rate Hike and Dollar Drivers
U.S. producer-price data reinforced expectations of a Federal Reserve rate hike, and a strong consumer-price reading could trigger a dollar relief rally.
Economic and Market Risks
Analysts said sustained dollar strength would likely require follow-through from the Federal Reserve, while markets remained jittery ahead of consumer-price data.
Yen performance
Rate Hike and Dollar Drivers
The yen remained more than 6% stronger since the late-July intervention and stayed near a seven-month high.
Economic and Market Risks
The yen retreated 0.50% on the day as the dollar recovered, despite expectations of a Bank of Japan rate hike.
Key facts
- ECB decision
- Raised interest rates by 25 basis points, its second rate increase this year.
- Euro
- Down 0.19% against the dollar at $1.1612.
- Dollar index
- Up 0.28% at 99.06.
- Brent crude
- Rose 6.3% to settle at $107.63 a barrel.
- Yen
- Down 0.50% at 154.32 per dollar; still more than 6% higher since late-July intervention.
- Swiss franc
- The dollar strengthened 0.35% to 0.813 Swiss francs.
- Other currencies
- The Canadian dollar weakened 0.20%, sterling weakened 0.27%, and the yuan held near a 3.5-year high.
Quotes
Eugene Epstein
Head of structured products for North America at Moneycorp
“ECB rate hike odds have all increased so I would argue it was hawkish but I really think the main driver of the stronger dollar, which is the case across all currency pairs, is the PPI. I think markets are quite jittery ahead of tomorrow's CPI, which is really the main event.”
livemint.com
“A hot print could support a relief rally, but sustained USD strength still likely requires Fed follow-through”
livemint.com
Sources
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