The dollar index hovered at its highest level in a month against a basket of currencies – today, Wednesday – at a time when statements by Christopher Waller, a member of the Board of Governors of the Federal Reserve (the US Central Bank), weakened expectations of reducing interest rates next March.
Waller said yesterday that although the United States is “close to” the inflation target set by the Central Bank of 2%, the bank should not rush to reduce the benchmark interest rate until it is clear that the decline in inflation will continue.
Market expectations for lowering interest rates next March have declined to a chance of 62.2%, compared to 76.9% in the previous session.
Despite this, the markets are still betting on six interest rate cuts this year, by 25 basis points each time.
The dollar index – which measures the performance of the US currency against a basket of major currencies – reached 103.35 points after rising to 103.42 points during the previous session, which is its highest level since December 13, 2023.
Yesterday also witnessed the largest percentage increase in the dollar – in one day – since January 2.
Meanwhile, the euro hovered near its lowest level in more than a month at $1.0860 after its largest single-day drop in two weeks, following comments from several ECB policymakers this week that kept uncertainty about the timing of interest rate cuts.
The pound sterling was last trading at $1.2605, after a sharp decline yesterday in the wake of data showing a slowdown in British wage growth for the three months until last November.
The Japanese yen came under some pressure again. It reached its lowest level since early December at 147.45 per dollar in light of the support the US currency received from the rise in US bond yields.
Gold is falling
The price of gold fell today by 0.5%, continuing the downward journey that began the previous session, affected by Waller’s statements regarding reducing interest rates.
The price of gold in spot transactions reached $2,019.46 per ounce by 7:52 GMT, after falling 1.3% in the previous session, which is the largest decline in one day since last December 4.
The price of US gold futures also fell to $2,022.15.
Waller’s comments sparked widespread selling, which led to a decline in the three major US stock indices.
His statements prompted record US Treasury bond yields to record the largest increase in more than 3 months yesterday.
A stronger dollar would make gold bullion more expensive for holders of other currencies, while higher interest rates make non-yielding gold less attractive.
In terms of other precious metals, silver, platinum, and palladium fell 0.1% separately.
The price of silver in spot transactions reached $22.85 per ounce, platinum $899.80, and palladium $938.8.
