The Dollar Has Reportedly Eased Against Major Currencies While The Yen Is Gaining StrengthDecember 10, 2022
The value of the US dollar (USD) reportedly lost its strength against the majority of the currencies on Wednesday.
This happened as the discussion of increasing the interest rates shed light on another major concern. Investors are concerned that if the interest rates keep rising, then the US economy may face a recession.
On the other hand, the Chinese economy is making it back to its pre-pandemic levels. For a while, China had the COVID restrictions in place and the restrictions have lingered on for longer than any other country.
The country is fighting the growing number of COVID-19 cases on a daily basis. The entire population of China was getting affected due to the long-running lockdowns.
The Chinese economy has been taking a huge negative impact due to the persistent lockdowns. Finally, China has decided to lift the lockdowns.
With the business sectors opening up in China with the imports/exports getting on the right track, the Chinese economy has started recovering.
This is also causing the dollar price to take fall against the Asian currencies, especially, the Chinese yuan.
The worse Economy is Inbound in the US
According to expert economists and market observers, the situation is going to get worse for the US economy in the year 2023.
They are bracing themselves for the worst conditions that the country is going to face in the upcoming year. The executives from multiple banks in the United States are also backing up such predictions.
As per them, the US economy is not going to make it into a green zone in the upcoming year. Brian Moynihan, the CEO at the Bank of America has shared the data from his research about the US economy.
Moynihan has claimed that he has run his research through multiple scenarios and all the outcomes point towards the negative growth of the US economy in 2023.
He has also shared the same research data with investors, at all major investment firms in the United States, including Goldman Sachs.
He added that despite the efforts being made by the US Feds, the negative growth of the US economy will trigger from the first quarter of 2023.
However, the beginning of the year with record mild contractions before they start growing severe in the upcoming months.
With every passing month, the economy may keep worsening and the situation may seem like it has gone out of the hands of the Feds.
According to him, the main reason behind the economic downfall in 2023 would be the constant hike of the interest rates by the US Feds.
US Feds May Announce Further Interest Rate Hikes
From the start of November, there was very high anticipation about the interest rates being reduced by the Feds. The weakening inflation rates were the reason that led to the Feds making a decision to lower the interest rates.
However, the recent services and factory data collected from the US employment report may give an opportunity to Feds in continuing with their rate hikes.
Despite announcing the interest rate hikes will be weaker, the recent employment data in the US may compel the Feds to continue with their hawkish approach.
According to Moynihan, if the Feds continue with the rate hikes, then they will end up pushing the country toward recession.
The Feds are expected to hold a meeting next week where they will confirm whether they will stick with their decision or side with their old strategy.
The US Dollar Index Moved 0.2% Lower
Due to the recent decline in the dollar price, its DXY has also recorded a 0.2% dip in the latest trading session.
The value of the euro which was down against the dollar yesterday is up by 0.2%. The current trading price of the euro versus the dollar is $1.0488.
The Japanese yen has also surged 0.2% against the greenback as the country is also moving with the rate hike policy.