The U.S. Dollar reached the highest price in five months against the Euro due to a hike in short-term Treasury yields. The surge occurred as a result of increased speculation that the Fed will boost the key cash rate soon.
Greenback Rallies Against Euro
The greenback made gains against the Euro and climbed against the majority of its Forex market counterparts. The rally against the Euro occurred as a result of increases in short-term U.S. Treasury yields, prompted by speculations that the Federal Reserve will have no option but to raise the benchmark interest rate earlier than planned. The U.S. Dollar’s recovery was also due to positive metrics revealing that consumer prices jumped by 0.3 percent in June, and on a year-over-year basis, the consumer prices gained by 2.1 percent, just as the markets expected.
Aussie Also Posts Advance
The Australian Dollar gained against most of its peers after Reserve Bank governor Glenn Stevens delivered a speech in Sydney, but refrained from addressing the bank’s concerns regarding the appreciation of the Aussie and its effects on the economy. He only mentioned that the currency fell 1 percent in the early part of July, but continues to be “overvalued.” Mr. Stevens ended his comments by indicating that he is satisfied with the present monetary policies and suggested that the monetary authorities are willing to step in and do whatever is needed to ensure the economy achieves a proper balance.
The New Zealand Dollar traded to the downside against the greenback despite that market sentiment shifted towards risk appetite. Money market traders remained cautious in light of the escalating tensions between Russia and the West; and as they await for the Reserve Bank of New Zealand to issue a decision on the key cash rate this week. It’s true that consumer price inflation posted below investors’ forecasts, but nonetheless, the metrics were just what the central bank anticipated. And since the data revealed that the South Pacific nation sustained an annual inflation of 2.7 percent, many economists say the rate may not convince the bank to refrain from raising the borrowing costs.
Gold Declines In London
Gold prices declined in London on Tuesday as the markets anticipate that the U.S. will raise the costs of borrowing money. The shiny metal was also affected as the greenback rose against the majority of its foreign currency peers. Gold for immediate delivery traded at $1,306.35 an ounce, while Futures for December delivery reached $1,308.40 a troy ounce on the Comex.