billiedurgin7ParticipantJanuary 16, 2022 at 6:40 pmPost count: 1
<br>By Tom Westbrook<br> <br>SINGAPORE, June 18 (Reuters) – The dollar was headed for its best week in nearly nine months on Friday as investors scrambled to price in a sooner-than-expected ending to extraordinary U.S. monetary stimulus in the days after a surprise shift in tone from the Federal Reserve.<br> <br>Since Wednesday, when Fed officials projected possible rate hikes in 2023, the greenback has surged some 1.8% on the euro and more than 2% against the Australian dollar and the negative-yielding franc as short-sellers have rushed to close positions.<br> <br>The dollar index has zoomed above its 200-day moving average, hitting a more than two-month high of 92.010, and is on track for a 1.6% weekly gain, its largest since last September.<br> <br>”The Fed sent a very crucial message, that the days of plentiful, abundant, unlimited liquidity are drawing to a close,” said Richard Franulovich, head of FX strategy at Westpac in Sydney.<br> <br>”We can now see an end point to zero rates …
and they’ve told us in very plain-speaking English that they’ve commenced the conversation on how to commence tapering,” he said. “That signal has precipitated a dramatic position unwind, because U.S. dollar shorts were based on that unending liquidity tap from the Fed, and zero rates.”<br> <br>The Antipodeans were sold even lower in Asia on Friday, while other majors stabilised. The euro sat just above a two-month low at $1.1914.<br> <br>The Aussie struck its lowest since December at $0.7521 on Friday and the kiwi fell to its weakest since April at $0.6982, defying eye-popping reports on Australian jobs and New Zealand growth this week.<br> <br>The dollar is also on track for a 0.5% rise against the yen .
The yen sat at 110.25 per dollar after hitting an 11-week low of 110.82 on Thursday and was little moved by the Bank of Japan keeping its main policy settings steady, as expected.<br> <br>Sterling fell 0.2% to $1.3900 and is headed for a weekly loss of 1.5%.<br> <br>”You can often glean a sense of how the market is positioned by the way it trades,” Franulovich said. “The viciousness with which the dollar has bounced back … tells me that there’s been a decisive shift for a lot of big, stale positions.
This is a meaningful, decisive re-thinking in dollar prospects.”<br> <br>BEAR HUNT<br> <br>Investors had piled into bearish dollar positions, banking on twin current account and budget deficits pulling capital abroad and the dollar lower as the global pandemic recovery gathers momentum.<br> <br>The shakeout has been triggered by Fed forecasts, or ‘dot plots,’ showing 13 of the 18-person policy board saw rates rising in 2023, versus only six previously, with the median board member tipping two hikes in 2023.<br> <br>While the plots are not commitments and have a poor track record of predicting rates, the sudden shift was a shock that has also reverberated through the bond market and metal prices.<br> <br>Gold has been walloped by rises in the dollar and U.S.
yields and is on track for a more than 5% weekly loss.<br> <br>Treasuries sold heavily, although the U.S. yield curve has flattened as top 10 binary options traders seem hopeful that a more aggressive Fed could move more quickly to head off inflation – leading some to reckon that the dollar’s bear case remains intact.
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