The US dollar rallied against its major competitors today triggered by the hawkish tone taken by the Fed chairperson, Janet Yellen, during her testimony before the Senate Banking Committee. The Fed chair spoke clearly in favor of hiking rates multiple times this year saying that it would be unwise for the Federal Reserve to wait too long before raising rates to accommodate inflation.
There was a major spike in the US dollar’s performance against its main competitors such as the euro and the Japanese yen, which occurred immediately after Janet Yellen’s testimony. The US dollar index, which tracks the greenback’s performance, recorded a high of 101.38; this was its highest level since January 20.
The greenback started the day’s session on a bearish trend, but Yellen’s testimony triggered the ‘Trump trade’ that has been running since November last year when Donald Trump was elected as the US President. Yellen’s comments indicated that the Fed has confidence in the performance of the US economy over the coming year, which served to restore investor confidence in the currency.
The performance of the US dollar was negatively affected by the bond sell-off that started yesterday as a warning to the Trump administration.
The employment and inflation figures recorded in the near-term will be crucial to the greenback’s performance as higher figures could lead to a Fed rate hike.
The EUR/USD was trading at 1.0561 as at 18:06 GMT having dropped from a high of 1.0632 before Yellen’s speech. The USD/JPY was trading at 114.46 having risen from a daily low of 113.22.
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