Growth of US dollar begins to slow


The US dollar (USD) was close to half of its trade range during the European trading morning on Thursday, 16 September 2021, against its major competitors compared to previous months. Investors and especially speculative traders are expecting a meeting of the Federal Reserve System (Fed) next week to find out if a key decision-making body, the Federal Open Market Committee (FOMC) will start narrowing its monetary stimuli.

During Thursday’s European trading morning of 16 September at 7:26 am CET, according to the US Dollar Currency Index (DXY), which compares the exchange value of the USD with the other six major world currencies, the USD was seen at a price level of 92.56 with a very modest growth of +0.01% so far. At the time mentioned, the mutual exchange rate of the global currency pair EUR/USD on the foreign exchange – Forex market was still in the current daily exchange rate loss of the single European currency, the euro (EUR) against the USD. This currency pair traded on the Forex market at a mutual exchange rate of US$ 1.1802 USD per EUR, with the current daily decline of the EUR by -0.11% against the USD. According to analysts, the assumption is to some extent that the EUR will continue weaken even more against the USD.

At the beginning of this week, which is the 37the one of 2021, the exchange value – according to the US Dollar Currency Index (DXY) – reached its two-week maximum at 92,887 after a report on the decline in inflation in the United States was published on Tuesday, 14 September. However, this positive investor sentiment did not last long and subsequently the USD exchange value according to the DXY index fell to a weekly low of 92,321. The previous low for the month was 91,941, which represents the DXY index value from 3 September 2021, when data from the US labor market and especially wage data significantly disappointed the expectations of investors and financial market analysts. “We’re waiting for the FOMC next week – that remains the key focus,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo. “I don’t think the dollar is going to go too far in either direction (before that),” he added.

The traditional two-day monetary policy meeting of the Central Bank of the United States of America and its key committee – the Federal Open Market Committee (FOMC) begins next week on Tuesday, 21 September and ends on 22 September. This FOMC meeting should provide some clarity regarding the gradual reduction or even possible increase of interest rates. According to analysts, a change in interest rates is not expected immediately after this meeting, but the current state of the US economy and its continued healthy functioning – especially the banking sector – needs to know the outlook for these planned changes. Some time ago the Fed chief Mr. Powell said that till 2023 FOMC will not be making changes in interest rates but due to rising inflation and other macroeconomic data this seems unfounded and consequently damaging to the US economy. For the time being, according to experts, it looks like the volume of bond repurchases will be reduced, which usually raises the exchange value of the USD and at the same time it suggests that the FOMC is one step closer to a tighter monetary policy. It also means that the central bank will buy less debt assets, which will actually reduce the number of USD in circulation and thus increase the exchange value of the USD, said Forex market financial strategists.


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