On Wednesday, the dollar index improved again, rising 0.27 percent to 90.34 points, while the euro gave up 0.40 percent to $1.2156. Since its low on January 6 in the session, the greenback has jumped more than 1 percent, taking advantage of higher interest rates and growth forecasts in the future, thanks to the predicted economic rebound.
In the U.S. sovereign debt market, yields eased after some Fed members’ comments, emphasizing the need for the U.S. central bank to continue purchasing bonds for a long time. Inflation accelerated in the United States in December. On a month-on-month basis, the consumer price index rose by 0.4 percent in December, compared to -0.2 percent in November. Year-on-year, prices rose 1.4 percent, well below the 2 percent goal of the US Federal Reserve.
On Wednesday, the 10-year T-Bond yield fell to 1.09 percent (-4 basis points) after climbing to 1.18 percent in the previous session, the highest since March 2020. In expectation of the latest fiscal stimulus package of the Biden administration, which could fuel inflation and force the Fed to slash its holdings of securities, the rate that began the year at 0.9 percent, has ignited (“tapering”).
Several Fed representatives have spoken since Tuesday, and one of them, Dallas Fed President Robert Kaplan, said the institution could consider ‘taping’ as early as this year, i.e. a decline in asset purchases by the central bank, which has been purchasing bonds massively to help markets since March 2020.
James Bullard (St. Louis Fed) and Eric Rosengren (Boston Fed) addressed the issue on Wednesday that the Fed’s priority was to help the economy before the pandemic completely healed, raising concerns of premature monetary policy tightening.