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CAPITALDIGEST, MARKET REVIEW, 5/9/2022

DOLLAR EASES, BUT REMAINS NEAR 2-DECADE HIGHS The dollar eased against a basket of currencies on Wednesday, but remained near the 2-decade high hit on Monday, as traders braced for more interest rate hikes from the U.S. Federal Reserve. The dollar index, which measures the greenback against a basket of six currencies, was last down 0.1% at 108.66, after earlier coming within a whisker of Monday’s two-decade peak of 109.48. The index is on track for a rise of around 2.6% in August, its third-straight monthly gain. A steady line of Fed officials have reiterated support for further rate hikes to quell decades-high inflation, the latest being Cleveland Fed President Loretta Mester, who said on Wednesday that rates will have to rise to “somewhat above 4%” by early next year and then be held there for some time. STERLING, EURO SLIDE AS DOLLAR MARCHES HIGHER The dollar gained ground against the euro and sterling on Thursday after earlier hitting a 24-year peak against the Japanese yen, as investors positioned for higher U.S. interest rates and remained concerned about the health of European economies. The euro slid 0.37% to just hold above parity against the dollar at $1.10016, while the pound hit a fresh two-and-a-half year low of $1.15545 down around 0.5%, as the safe-haven dollar was supported by moves away from riskier assets. The U.S. dollar index, which measures the greenback against a basket of currencies, was up 0.34% at 109.09, not far off its two-decade high of 109.48 hit on Monday. “Even after hitting fresh records, USD strength has scope to extend somewhat further, boosted by the global slowdown and the European energy crunch in particular,” said analysts at Generali Insurance Asset Management. DOLLAR EASES FROM 20-YEAR HIGH AS MARKET DIGESTS The dollar edged back from a 20-year high on Friday as traders digested a report that showed the pace of hiring rose slightly more than expected in August, giving the Federal Reserve some wiggle room in how aggressively it hikes interest rates later this month. Nonfarm payrolls rose by 315,000 jobs in August, data showed, topping the consensus forecast of 300,000 jobs by economists polled by Reuters, and marking the 20th straight month of job growth. The dollar index, which tracks the currency against six counterparts, initially declined on the jobs report, but then reversed course and erased a chunk of its losses. DOLLAR SET FOR WEEKLY GAIN FOLLOWING MIXED JOBS DATA The dollar eased from a 20-year high on Friday after data showed the pace of US hiring rose more than expected in August, but wage growth moderated and unemployment ticked higher, giving the Federal Reserve some wiggle room when it raises interest rates later this month. The US economy added 315 000 jobs in August, data showed, topping the consensus forecast of 300 000 jobs by economists polled by Reuters, and marking the 20th straight month of job growth. The dollar index, which tracks the currency against six counterparts, zig-zagged following the report, in thin trading ahead of the long North American Labour Day weekend. “Non-farm payrolls being mixed was an excuse to book profit in the dollar’s surge to 20-year highs,” said Joe Manimbo, senior market analyst at Convera. STERLING SLIDES BELOW $1.15 FOR FIRST TIME SINCE 2020 Sterling skidded against the dollar on Thursday to its lowest level since March 2020 as storm clouds gathered over the British economy and investors seek safety in the U.S currency. Adding to August losses that amounted to its worst month since late 2016, the pound briefly slid as low as $1.1499, a new low since March 2020 when COVID-19 hit markets. The British currency was last hovering just above that level at $1.1534, down 0.7% on the day. The pound lost 4.6% against the dollar last month in its worst performance since October 2016, and has fallen by nearly 15% this year, fuelled by concerns about slowing growth in the British economy as inflation soars into double digits