# Dollar slides from near two-year high amid hawkish signals from Fed
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-04-07
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Dollar Slides From 2-Year High on Fed Signals in Europe
Meta Description: Explore how the dollar recently slipped from a near two-year high as investors consider the implications of the latest hawkish signals from the Federal Reserve.
URL: https://financedigest.com/dollar-slides-from-near-two-year-high-amid-hawkish-signals-from-fedhtml

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By Gertrude Chavez-Dreyfuss and Tommy Wilkes

NEW YORK/LONDON (Reuters) – The dollar slipped from a near two-year high on Thursday, as investors digested hawkish signals from the Federal Reserve and wondered whether expected tightening moves in the future have already been priced in.

The dollar index hit 99.823 on Thursday, the highest since late May 2020. It was last flat at 99.639.

St. Louis Fed president James Bullard, a voter this [year on the Federal Open](https://www.financedigest.com/four-years-of-open-banking-2022-may-be-the-best-year-yet.html "Four years of Open Banking: 2022 may be the best year yet ") Market Committee and a known hawk, continued to sound the alarm on inflation on Thursday.

He said the Fed remains behind in its fight against [inflation despite increases in mortgage rates and government bond yields that have raced ahead](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") of actual changes in the central bank’s target federal funds rate.

Bullard’s comments, however, had little [impact on the dollar](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades").

The [Fed has laid out its plans quite clearly so markets](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi") can plan knowing what’s ahead,” said Juan Perez, director of trading, at Monex USA in Washington.

He noted that in the Fed’s past four tightening cycles, the dollar has depreciated by an average of 4.0%. The [dollar currently sits at a nine-month gain](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") of 7%.

Perhaps [history is ready to repeat](https://www.financedigest.com/feds-job-friendly-soft-landing-hinges-on-history-not-repeating.html "Fed’s job-friendly ‘soft landing’ hinges on history not repeating") itself. With global inflation also rising, other [central banks](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") will also be speculated to tighten their belts and thus improve the value of those currencies against the buck,” Perez added.

The dollar climbed to its highest in nearly two years on Wednesday after minutes from the March [Fed meeting showed “many” participants were prepared to raise interest rates](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up") in 50-basis-point increments in coming months.

The Fed also prepared markets for a reduction in the [Fed’s balance sheet after the May meeting at a rate](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") of $95 billion per month, the beginning of the reversal of the massive stimulus it pumped into the economy after the COVID-19 pandemic struck.

That’s nearly twice as quick as was seen during the last [balance sheet](https://www.financedigest.com/decoding-balance-sheets-analyzing-assets-liabilities-and-equity.html "Decoding Balance Sheets: Analyzing Assets, Liabilities, and Equity") run-down during the 2017-19 cycle,” ING analysts said.

“All of the above points to the Fed applying a heavy foot to the brakes, which should be positive for the dollar.”

The euro, on the other hand, [hit a one-month trough against the dollar](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") of $1.0865, but was slightly higher on the day, just above $1.09.

[European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") policymakers appeared keen to unwind stimulus at their March 10 meeting, with some pushing for even more action, as conditions for raising rates had either been met or were about to be met, minutes of the ECB meeting showed on Thursday.

An increasingly close-looking presidential election in France is another wild card, and the prospect of far-right candidate Marine Le Pen beating incumbent Emmanuel Macron has undermined the euro and [French debt ahead of Sunday’s first-round vote](https://www.financedigest.com/parisians-vote-to-ban-e-scooters-from-french-capital.html "Parisians vote to ban e-scooters from French capital").

The Australian and New Zealand dollars fell 0.4% and 0.5% respectively versus the greenback, as the [Fed’s tone offset a hawkish shift from Australia’s central bank](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade"), while a pullback in commodity prices also reversed some of their recent strength.

Against the yen, the dollar rose 0.2% to 123.965.

========================================================

Currency bid prices at 10:34AM (1434 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 99.4970 99.6370 -0.13% 4.008% +99.8230 +99.3900

Euro/Dollar $1.0922 $1.0895 +0.26% -3.92% +$1.0936 +$1.0865

Dollar/Yen 123.9200 123.7850 +0.11% +7.65% +123.9950 +123.4650

Euro/Yen 135.33 134.85 +0.36% +3.84% +135.5000 +134.4300

Dollar/Swiss 0.9321 0.9327 -0.06% +2.19% +0.9348 +0.9319

Sterling/Dollar $1.3077 $1.3069 +0.07% -3.30% +$1.3106 +$1.3054

Dollar/Canadian 1.2576 1.2544 +0.26% -0.53% +1.2595 +1.2538

Aussie/Dollar $0.7485 $0.7509 -0.31% +2.99% +$0.7570 +$0.7474

Euro/Swiss 1.0179 1.0169 +0.10% -1.83% +1.0198 +1.0147

Euro/Sterling 0.8351 0.8340 +0.13% -0.58% +0.8364 +0.8315

NZ $0.6896 $0.6916 -0.46% +0.58% +$0.6920 +$0.6884

Dollar/Dollar

Dollar/Norway 8.7765 8.8080 -0.03% -0.05% +8.8210 +8.7545

Euro/Norway 9.5896 9.5835 +0.06% -4.23% +9.6134 +9.5521

Dollar/Sweden 9.4443 9.4820 -0.17% +4.73% +9.4982 +9.4243

Euro/Sweden 10.3154 10.3331 -0.17% +0.80% +10.3580 +10.2952

(Reporting by Gertrude Chavez-Dreyfuss in New [York and Tommy Reggiori Wilkes in London; Editing by Kim Coghill, Andrew Heavens and Nick Macfie)](https://www.financedigest.com/new-york-holds-top-spot-london-second-in-z-yen-financial-centre-survey.html "New York holds top spot, London second in Z/Yen financial centre survey")


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