Dollar recovers ground as risk appetite fades



(Updates to U.S. afternoon)

By Saqib Iqbal Ahmed

NEW YORK, May 18 (Reuters) - The U.S. dollar rose on Wednesday, on pace to snap a three-session losing streak, as concerns about the outlook for global economic growth and rising inflation knocked sentiment a day after U.S. Federal Reserve Chair Jerome Powell struck a more hawkish tone.

Powell on Tuesday pledged that the U.S. central bank would ratchet up interest rates as high as needed, including taking rates above neutral, to curb a surge in inflation that he said threatened the foundation of the economy.

The neutral rate is the level at which economic activity is neither simulated nor constrained and is widely expected to be somewhere in the region of 3.5% by mid-2023. 0#ED:

On Wednesday, the dollar benefited from demand for safe havens as stocks sold off and Treasury yields fell.

"Yesterday's risk rally appears to have been, predictably, short-lived, having fizzled out almost entirely in this morning's trade," said Michael Brown, head of market intelligence at Caxton in London.

"Consequently, haven USD demand has re-emerged, with something of a 'flight to cash' taking place, with Treasuries failing to find bids despite the shaky sentiment," Brown added.

The U.S. Dollar Currency Index =USD , which tracks the greenback against six major currencies, was up 0.4% at 103.76, on pace to snap its longest losing streak since mid-March.

"Technically, it will please the bulls that the dollar index has managed to hold above the prior support at 103.20, which when coupled with the continued dismal economic backdrop should keep the USD firm for now," Caxton's Brown said.

The pound fell 1.1% against the dollar on Wednesday after data showed British inflation rising to 9%, the highest level in 40 years.

With investors taking a dim view of riskier currencies, the Australian dollar AUD=D3 , viewed as a liquid proxy for risk appetite, slipped 0.8%. Australian wage growth ticked up by only a fraction last quarter, leading investors to scale back bets on larger increases in interest rates.

Cryptocurrency markets were fairly quiet after last week's turmoil. Bitcoin BTC=BTSP fell about 4% and was last trading at $29,094.59. Ether ETH=BTSP fell 6% to slip below $2,000.



World FX rates Link



Reporting by Saqib Iqbal Ahmed; editing by Jonathan Oatis and
Will Dunham

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.