Dollar Up, Investors Assessing the Risk of a Recession

© Reuters.

By Zhang Mengying

AiVIF.com – The dollar was up on Wednesday morning in Asia, with investors mulling the risk of a recession from major central banks’ interest rate hikes.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.01% to 104.51 by 01:15 AM ET (0515 GMT).

The USD/JPY pair inched down 0.02% to 136.10.

The AUD/USD pair stabilized at 0.6906, and the NZD/USD pair edged up 0.18% to 0.6252.

The USD/CNY pair inched down 0.07% to 6.7030, while GBP/USD pair edged up 0.13% to 1.2198. China took a surprise move Tuesday to cut quarantine times for inbound travelers to seven days from 14 days in centralized quarantine facilities. The step lifted market hopes of China’s shift to another COVID-19 strategy which could cost less economic damage.

U.S. 10-year Treasury yields slid more than 1 basis point, trading to around 3.17%.

The euro inched down 0.07% to 1.0511 after European Central Bank (ECB) chief Christine Lagarde offered no new insight on the ECB’s interest rate hike path. The ECB is expected to hike interest rates in July for the first time in a decade to tame soaring inflation.

Lagarde and U.S. Federal Reserve Chair Jerome Powell will speak on a panel at the forum later in the day.

Inflation worries are still on investors’ radar as U.S. conference board (CB) consumer confidence fell to a 16-month low in June as high inflation left consumers to worry about a slowing economy.

“Recession risk will periodically undercut DXY (but) the broader medium-term uptrend likely persists a while yet,” Westpac strategists wrote in a client note, referring to the dollar index, which they see sticking to a range of 101 to 105 for now.

“The DXY is unlikely to peak until we are closer to the end of the Fed's front-loaded tightening cycle,” the note added.

New York Fed President John Williams and San Francisco’s Mary Daly said that they had to cool inflation but insisted that a soft landing was still possible.

In Asia-Pacific, China’s purchasing managers index is due on Thursday.