Dollar Down as Recession Fears Continue to Mount

  • Forex News
Dollar Down as Recession Fears Continue to Mount
Credit: © Reuters.

By Zhang Mengying – The dollar was down on Thursday morning in Asia amid rising concerns of slowing economic growth after the U.S. Federal Reserve Chair’s hawkish testimony.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.07% to 104.13 by 1:08 AM ET (5:08 AM GMT).

The USD/JPY pair fell 0.58% to 135.48.

The AUD/USD pair was down 0.49% to 0.6892 and the NZD/USD pair edged down 0.18% to 0.6261.

The USD/CNY pair edged up 0.15% to 6.7124, while the GBP/USD pair edged down 0.10% to 1.2254.

Investors are worried that the Fed’s commitment to tame red hot inflation could trigger a recession, sending the 10-year Treasury yields to an almost two-week low.

U.S. Federal Reserve Chair Jerome Powell said that an aggressive interest rate hike could lead to an economic contraction and called a soft landing “very challenging” in his testimony to the Senate Wednesday.

Powell also said that he would not rule out a 100-basis point increase in interest rates, adding that the central bank would take whatever moves necessary to restore price stability.

“Powell’s semi-annual testimony has taken some steam out of the USD, his comments regarding elevated recession risk evidently weighing more than his unconditional commitment to restore price stability,” Westpac strategists wrote in a client note.

“But with 75bp still on the table for July and Fed Funds set to rise above 3% by year’s end, USD interest rate support should ultimately continue to build,” the note added.

On the data front, U.S. initial jobless claims is due on Thursday while U.S. University of Michigan consumer sentiment will be released on Friday.

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