We are delighted to announce that Robin Brundle, Chairman at Technology Minerals (TM1) joins Clifford Gross, Tekcapital (TEK), Mark Selby at Canada Nickel (CNC), and Werner Klingenberg, Goldplat (GDP) at our May Investor Webinar on Tuesday 24th. Please register here.

Less Ads, More Data, More Tools Register for FREE

Fears that high inflation could crimp global growth send dollar to 20-yr high

Thu, 12th May 2022 15:18

NEW YORK, May 12 (Reuters) - The dollar climbed to a 20-year high on Thursday as concerns persisted that central bank actions to counter high inflation would crimp global economic growth, boosting the currency's safe-haven appeal.

Data from the Labor Department showed weekly initial jobless claims rose to their highest level in three months, although the labor market remains a strength of the U.S. economy, while the producer price index showed a sharp deceleration in April to a 0.5% rise from the 1.6% surge the prior month, thanks in part to a sharp drop in energy products.

In the 12 months through April, the PPI increased 11.0% after accelerating 11.5% in March and above an estimated increase of 10.7%.

"PPI slightly mixed to slightly less than expected today but overall there is still a lot to worry about... if S&P sells off again that is going to be broadly supportive of dollars," said Erik Bregar Director, FX & Precious Metals Risk Management at Silver Gold Bull Inc in Toronto.

"We could get to a point where positioning becomes a little lopsided and that could maybe engineer some short covering in equities and maybe some cooling off in the dollar broadly but right now, the news cycle, you are finding enough reasons to stay long dollars."

The dollar index rose 0.433% at 104.450 after touching 104.72, its highest level since Dec. 12, 2002. The euro down 0.95% to $1.0411 after falling to 1.0328, its lowest since Jan. 3, 2017.

After the Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank's June meeting, according to CME's FedWatch Tool https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?redirect=/trading/interest-rates/fed-funds.html.

Irish Central Bank Governor Gabriel Makhlouf joined a chorus of European Central Bank policymakers calling for the Governing Council to act to tackle inflation, though not necessarily at the same pace as the U.S. Federal Reserve.

Rick assets have been under pressure for most of the year, with the S&P 500 on the verge of confirming it is in a bear market, commonly viewed as a decline of 20% from its record high.

Investors have moved towards safe-haven assets such as the dollar as worries have mounted about the Fed's ability to tamp down inflation without causing a recession, as well as repercussions from the war in Ukraine and rising COVID-19 cases in China sapping demand.

On Thursday, OPEC cut its forecast for growth in world oil demand in 2022 for a second straight month.

Another safe-haven, the Japanese yen, strengthened 1.40% versus the greenback at 128.16 per dollar, while Sterling was last trading at $1.2219, down 0.25% on the day after a flurry of soft economic data in Britain.

In cryptocurrencies, Bitcoin last rose 4.22% to $29,602.10 after falling to $25,390.26, its lowest level since December 2020.

Ethereum last fell 0.15% to $2,032.58.

More News
21 May 22 23:06

Earthquake of magnitude 5.8 strikes Philippines– EMSC

May 21 (Reuters) - A magnitude 5.8 earthquake struck the Philippines on Sunday, European-Mediterranean Seismological Centre said....

21 May 22 19:12

Motor racing-Aston Martin hit back at Red Bull accusations of copying

BARCELONA, Spain, May 21 (Reuters) - Aston Martin hit back at Red Bull accusations of copying their car on Saturday, saying they had been working on it long before any key staff joined from their riva...

21 May 22 16:14

HSBC banker's remarks on climate risk inconsistent with strategy, CEO says

May 21 (Reuters) - HSBC Holdings CEO Noel Quinn says his bank will not be distracted from its ambition to lead the global economy in the transition to net zero, after a senior executive said centra...

21 May 22 10:01

UK government must help poor now, says senior Conservative lawmaker

LONDON, May 21 (Reuters) - Britain's Conservative government needs to take measures now to help those most effected by a worsening cost-of-living crunch, former party leader and senior lawmaker Iai...

Login to your account

Don't have an account? Click here to register.

Quickpicks are a member only feature

Login to your account

Don't have an account? Click here to register.