April 25, 2024

Russia Shakes the Market Before Feds, Dollar Jumps Higher

The US Dollar has risen to a new twenty-year high level on Wednesday as the market got shaken by statements from the Russian President while the market yet expects the Federal Reserve’s new rate announcement. 

Russia Intensifies War Effort

The Russian President, Vladimir Putin, gave an order for the first mobilization in the country since the Second World War. He warned the West against continuing with its nuclear blackmail otherwise, Russia would not hesitate to respond to threats with all its arsenals. 

The news from Russia pushed the US Dollar index by over 0.5% higher to reach 110.87. It became the highest level of the Dollar’s gauge against other fiat currencies since 2002.

Currencies in Europe bore the weight of the foreign exchange selloff in the market after Putin’s statement. It intensified concerns about the economy in a region that already suffers due to Russia’s oil sanctions.

The Euro dropped to a low level of two weeks at $0.9885. It is now within the range of a twenty-year low level it early dipped to early this month. The last depth of the Euro was 0.6% which saw it at $0.9912.

The British Pound also suffered a 0.4% fall to a new low of 37 years to reach $1.1304. This was before the statement from the Russian President, by the way.

More Strength for the US Dollar

A currency strategist at Societe Generale, Kenneth Broux, said that the news from Russia is taking attention away from the US Federal Reserve at the moment. He continued by saying the possibility of an escalation in the European conflict poses a threat to currencies in Europe. If the Feds eventually come out hawkish by the end of their meeting, then the losses could be much more, he concluded.

The Federal Reserve is expected to increase interest rates on Wednesday by up to 75 basis points for the third time in a row. The Feds are also expected to give a clue as to how much they would still have to raise the rates and how often before inflation can be curbed.

The announcement coming up later on Wednesday would make it only the latest in the series of synchronized policy moves made by various central banks made to test the resolve of the global economy and how countries would be able to manage the rising value of the US Dollar against their currencies.

The US Dollar index has increased by nearly 16% so far this year and it is on its way to the higher level since 1981. Analysts say intensified geopolitical instabilities in Eastern Europe merely give more strength to the Dollar.

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