Dollar Slides amidst Economic Concerns, Yuan Strengthens
The U.S. dollar weakened slightly against major currencies on Wednesday amid concerns that rising interest rates could push the U.S. economy into recession, while an easing of China’s COVID restrictions boosted the Yuan.
Some U.S. bank executives are bracing for a worsening U.S. economy next year. Among them, Bank of America CEO Brian Moynihan told investors at a Goldman Sachs financial conference that the bank’s research shows “negative growth” in the first part of 2023, but the contraction will be “mild.”
A U.S. dollar index DXY, which measures the greenback against a basket of currencies, was last down 0.2%. One view is that “recessionary worries are going to drive the Fed to pause. This is why the dollar is weakening here,” said Edward Moya at OANDA.
“Surging interest rates have been the primary driver for dollar strength over the last year.”
Against the dollar, the euro was up 0.2% at $1.0488. The euro has risen recently on signs that Europe’s economic downturn may be less bad than previously feared. READ: Naira Strengthens Against Dollar, Chinese Yuan
The dollar was down 0.2% against the Japanese yen. The U.S. dollar was down 0.1% against the Canadian dollar. The Bank of Canada hiked its benchmark overnight interest rate by 50 basis points to 4.25%, the highest level in almost 15 years, and signalled the tightening campaign was near an end.
In Asia, China’s Yuan was firmer as the government earlier announced measures that marked a sharp change to its tough zero-COVID policy that has battered its economy and triggered historic protests.
Asymptomatic COVID-19 cases and those with mild symptoms can self-treat while in quarantine at home. The announcement was the strongest sign so far that China is preparing its people to live with the disease, though analysts say the path to fully reopening the economy will be long and bumpy.
The dollar was last down 0.1% against the offshore Chinese Yuan. # Dollar Slides amidst Economic Concerns, Yuan Strengthens