Dollar Climbs on Recession Worries

The Dollar Index follows the dollar against a basket of six other currencies. At 03:00 ET (08:00 GMT), it increased 0.1% to 105.670 after growing about 0.3% overnight.

The dollar underwent its worst monthly performance in November after September 2010, falling 5% on optimism that the U.S. Fed should restrict the speed of its rate hikes, likely ending in a soft landing for the U.S. economy.

Nevertheless, sentiment is altering. Moreover, the dollar is obtaining a bid again as traders factor in the growing threat of recession, especially in the U.S.

JPMorgan Chase CEO Jamie Dimon tallied these problems in an interview with CNBC on Tuesday. He stated that spending from the epidemic stimulus programs still supports the U.S. economy.

Consumers still hold $1.5 trillion in excess savings from these programs, but that will run out sometime mid-year next year.

EUR/USD dropped 0.1% to 1.0455, supported by German industrial production declining 0.1% in October, less than the predicted 0.6% decrease.

The ECB will assemble next week. It should raise interest rates again to attempt and contain inflation, having increased rates by 200 basis points since July.

That stated, ECB policymaker Constantinos Herodotou declared on Tuesday that the bank’s interest rates are currently “very near” their neutral level.

Other Currencies

GBP/USD dropped 0.1% to 1.2130 after U.K. house prices plunged at the sharpest pace in 14 years in November. It fell 2.3%, according to data from mortgage lender Halifax.

The Bank of England has regularly raised interest rates this year to try and control inflation rising at double digits, hitting discretionary spending in the country.

USD/JPY increased 0.3% to 137.46, AUD/USD climbed 0.1% to 0.6695, while USD/CNY declined 0.2% to 6.9828 after Chinese authorities announced the further relaxation of several coronavirus mobility curbs.

This surpassed a data release earlier Wednesday, which conducted the country’s foreign trade was in its most destructive state after 2020 when the first coronavirus lockdown hit trade.