Greenback extends golden run
Inflation fears propel U.S. dollar
NEW YORK – The United States dollar climbed to a 20year high by some measures on Thursday as concerns persisted that central bank actions to counter high inflation would crimp global economic growth, boosting the currency's safe-haven appeal.
Data from the U.S. Labour Department showed weekly initial jobless claims rose to their highest level in three months, although the labour market remains a strength of the U.S. economy, while the producer price index showed a sharp deceleration in April to a 0.5 per cent rise from the 1.6 per cent surge the prior month, thanks in part to a sharp drop in energy products.
In the 12 months through April, the producer price index increased 11.0 per cent after accelerating 11.5 per cent in March and above an estimated increase of 10.7 per cent.
"PPI slightly mixed to slightly less than expected today but overall there is still a lot to worry about . . . if S&P sells off again that is going to be broadly supportive of dollars," said Erik Bregar, director of foreign exchange and precious metals risk management at Silver Gold Bull Inc. in Toronto.
"We could get to a point where positioning becomes a little lopsided and that could maybe engineer some short covering in equities and maybe some cooling off in the dollar broadly but right now, the news cycle, you are finding enough reasons to stay long dollars."
The U.S. dollar index rose 0.433 per cent at 104.450 after touching 104.72, its highest level since Dec. 12, 2002. The euro was down 0.95 per cent to US$1.0411 after falling to US$1.0328, its lowest since Jan. 3, 2017.
After the U.S. Fed raised its benchmark overnight interest rate by 50 basis points last week, the largest hike in 22 years, investors have been attempting to assess how aggressive the central bank will be. Expectations are completely priced in for another hike of at least 50 basis points at the central bank's June meeting, according to CME'S Fedwatch Tool.
Irish Central Bank governor Gabriel Makhlouf joined a chorus of European Central Bank policy makers calling for the governing council to act to tackle inflation, though not necessarily at the same pace as the U.S. Federal Reserve.
Risk assets have been under pressure for most of the year, with the S&P 500 on the verge of confirming it is in a bear market, commonly viewed as a decline of 20 per cent from its record high.
Investors have moved towards safe-haven assets such as the U.S. dollar as worries have mounted about the Fed's ability to tamp down inflation without causing a recession, as well as repercussions from the war in Ukraine and rising COVID-19 cases in China sapping demand.
On Thursday, OPEC cut its forecast for growth in world oil demand in 2022 for a second straight month.
Another safe haven, the Japanese yen, strengthened 1.4 per cent versus the greenback at 128.16 per U.S. dollar, while Sterling was last trading at US$1.2219, down 0.25 per cent on the day after a flurry of soft economic data in Britain.
In cryptocurrencies, Bitcoin last rose 4.22 per cent to US$29,602.10 after falling to US$25,390.26, its lowest level since December 2020.
Ethereum last fell 0.15 per cent to US$2,032.58.