Dollar breaks downward trend pressured by the rise of the currency globally

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The price of the dollar reversed the initial trend and closed with a strong drop this Tuesday, thus breaking a streak of three consecutive sessions of falls, in line with the behavior of the currency at a global level, with the markets attentive to new signs regarding the next steps the Fed might take in its interest rate hike process.

The US currency ended trading at $787.13 compared to $781.25 the previous close, following hitting a session low of $776.08 earlier.

However, the dollar is still almost $90 lower than the all-time high of $876 that it recorded on December 20, 2021.

The markets are waiting to see the minutes of the latest monetary policy meeting of the Federal Reserve, which will be released tomorrow, to learn new signs regarding the expectations of the US Central Bank, in a context in which some of the its members are already reinforcing the idea of ​​a new rate hike in the world’s largest economy.

“The market is surprised by the statements issued by some members of the FED, in fact, FOMC member Brainard mentioned, among other things, that current inflation is too high.with significant upside risks, also adds that the Fed is ready to take more aggressive measures if inflation and inflation expectations indicators suggest that it is necessary”, said Daniel Seydevitz, senior market analyst at XTB Latam.

“This translates into the markets with the main American indices falling and increases in the dollar index, which is trading above 99,300 points. This puts upward pressure on the local exchange rate, with rises of just under $10″, added Seydevitz.

In mid-March, in the midst of a scenario of a sharp increase in inflation in the United States, which in February rose 0.8%, raising the annual record to 7.9%, the highest in 40 years, and with price pressures that have been exacerbated by the war between Russia and Ukraine, The Federal Reserve (Fed) applied its first interest rate hike since the end of 2018.

Investors are betting that a new increase will also be 50 points. In this context, the dollar index, which measures the currency once morest a basket of six liquid currencies, including the euro, advanced 0.50% to 99.47 points.

higher risk

Meanwhile Ricardo Bustamante, Head of Trading Studies at Capitaria, pointed out that “the price of the dollar shows a strong rebound today, in line with the performance of the North American currency at the regional level, following a strong decline in assets considered higher risk”.

In this sense, he explained that fears return to international markets, “because there are important signs of a possible greater economic deterioration, a situation that impacts the riskiest assets, where the currencies of emerging economies are strongly pressured.”

For its part, the price of copper, the country’s main export, closed 1.21% higher at US$4.72916 a pound on the London Metal Exchange, but three-month futures reversed their gains and fell 0 .36% to US$4.76 a pound.