US Dollar Touches Highest Level in 20 Years, Pound Drops All

JAKARTAKOMPAS.com – Index dollar AS reached its highest level in 20 years against global currencies, on Thursday (5/5/2022). This happened after the stock sell-off in Wall Street massively, thereby driving demand for the currency safe heaven.

The dollar index reached the level of 103.94, or became the highest since December 2002. However, at the close of Wall Street trading, the dollar index slightly corrected 0.9 percent and returned to the level of 103.51.

Read also: Wall Street Slaps Day After Fed Rate Announcement, Technology Stocks Fall

As is known, the day before the Federal Reserve or The Fed raised interest rates by 50 basis points, and at the same time tightened monetary. Wall Street fell a day after the Fed’s policy was announced, and investors flocked to their assets.

Greenback down on Wednesday, but Wall Street closed higher. This comes after Fed Chair Jerome Powell said policymakers were not considering an increase of up to 75 basis points at their next meeting.

“The market supports the Fed’s decision to sacrifice the dollar as it helped quell concerns about aggressive rate hikes pushing the economy into recession,” Joe Manimbo, senior market analyst at Western Union Business Solutions, quoted CNBC.

Read also: Press Inflation, Bank of England Follows Fed Raise Benchmark Interest Rate by 25 Basis Points, Highest in 13 Years

Manimbo also said, the dollar index bounced back because interest rates will double to 1.9 percent in July, and potentially tripled to 2.7 percent by the end of the year.

“It’s a solid hawkish outlook that sets the Fed apart from its main rivals,” added Manimbo.

Meanwhile, the British currency, the pound sterling fell to its lowest level since June 2020 of 1.23 US dollars (down 2.1 percent), after Bank of England (BOE) raised interest rates to the highest level since 2009, and warned of the risk of a recession.

“The Bank of England is very dovish, and is basically telling the market that rising prices are in line with bank rate hikes,” said Erik Nelson, macro strategist at Wells Fargo.

The euro also weakened after German data showed its deepest sales decline since October last year. The single currency has fallen as the region struggles with weaker growth and energy disruptions due to sanctions imposed on Russia after its invasion of Ukraine.

The euro fell to as low as 1.0547 US dollars, down 0.7 percent, and held just above its lowest level in five years, namely at 1.0470 US dollars.

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