Recent dollar news has led to the biggest weekly rise since March 2020, according to data from the Commodity Futures Trading Commission (CFTC).
U.S. dollar up, euro down – Stocks, precious metals and cryptocurrencies down
On Monday, the Dow Jones Industrial Average fell 400 points as inflation fears continue to rattle Wall Street. The four major stock indexes – NYSE, Nasdaq, Dow and S&P 500 – all started the morning in the red from last week’s gains. The gold and silver markets have felt downward pressure this week, as both precious metals are down in value this Monday morning. In addition, the global crypto-currency market capitalization is also down 1.4% today and sits just above the $1 trillion mark.
The beginning of the week saw the euro fall below the U.S. dollar. for the second time in 20 years. At the time of this writing, the two fiat currencies are trading for exactly the same value, but the euro slipped to $0.99 early Monday morning. The euro’s fall below parity with the dollar and its reaching of it also took place on July 12, 2022, when the dollar reached 1.0098. On Monday, August 22, the Dollar Index (DXY) continues to show strength at 108.711.
Reuters reports that the euro’s drop on August 22 is due to an energy and oil crisis that Europe has been facing since the Ukraine-Russia war began. Reuters also analyzed data from the CFTC and the numbers show that the “U.S. dollar net longs reach highest level since early March 2020“. Many believe that as long as the war persists and the Federal Reserve continues its interest rate hikes and monetary tightening, the greenback will remain robust.
China’s real estate crisis is pushing the central bank to cut interest rates amid fears of higher U.S. federal funds rates.
In addition to the strong dollar and the war in Europe, China’s economy has been dealing with a major real estate crisis. On Monday, China’s central bank cut the benchmark lending rate and the benchmark mortgage rate to ease pressure on the economy.
With the dollar strong, major Wall Street indices in the red, gold and silver down, and the crypto economy flailing, news reports indicate that the fear stems from the Federal Reserve’s upcoming rate hike. However, after the U.S. central bank raised the federal funds rate by 75 basis points (bps) last month, estimates gathered by Reuters indicate that the Fed may be more accommodative this month.
“The U.S. Federal Reserve will raise rates by 50 basis points in September amid expectations that inflation has peaked and growing fears of a recession, according to economists polled by Reuters“, the report explained.