U.S. Dollar Falls As Treasury Yields Decline On Recession Worries

dollar 080219 22jun22 lt

The U.S. dollar dropped against its major rivals in the New York session on Wednesday, amid a sell-off in treasury yields on concerns that the Federal Reserve's aggressive monetary tightening to tame inflation could push the economy into recession.

U.S. treasuries rose as investors fear that the Fed's commitment to tackle price pressures by hiking rates sharply is likely to cause a recession.

The benchmark yield on the 10-year note fell to 3.14 percent. Yields move inversely to bond prices.

In his testimony before the Senate Banking Committee, Powell said that the Fed is strongly committed to bring inflation back down to its longer-run goal of 2 percent.

"At the Fed, we understand the hardship high inflation is causing," Powell said. "We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so."

"We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses," he added. "It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all."

The dollar has been trading in a negative territory against its major rivals in the previous session.

The greenback depreciated to near a 3-week low of 0.9581 against the franc, from a 2-day high of 0.9690 seen at 2:45 am ET. At Tuesday's close, the pair was valued at 0.9659. The greenback is seen finding support around the 0.93 level.

The greenback reached as low as 1.2314 against the pound, after hitting a 6-day high of 1.2161 at 3:20 am ET. The pound-greenback pair had finished yesterday's trading session at 1.2276. Immediate support for the greenback is likely located around the 1.25 level.

Data from the Office for National Statistics showed that UK consumer price inflation rose further in May at the fastest pace in 40 years on rising energy and food prices, deepening the cost of living crisis.

Consumer price inflation rose to 9.1 percent in May, in line with expectations, from 9.0 percent in April. The ONS said the consumer price index would last have been higher around 1982.

Following a 5-day high of 1.0469 hit at 3:05 am ET, the greenback moved down to near a 2-week low of 1.0605 against the euro. The pair had closed Tuesday's deals at 1.0531. Further fall in the currency may challenge support around the 1.08 level.

The greenback edged down to 135.68 against the yen, from a session's high of 136.71 it touched in the Asian session. The pair was worth 136.59 when it ended deals on Tuesday. Next immediate support for the greenback is seen around the 120.00 level.

Minutes from the Bank of Japan's April 27 and 28 policy meeting showed that members judged that the country's economy is headed in the right direction - although the upside continues to be limited by lingering COVID-19 cases.

Exports and industrial production continue to strengthen, the minutes said, although employment and overall income remain weak.

The greenback was trading at 0.6948 against the aussie and 0.6305 versus the kiwi, pulling back from its European session's 1-week high of 0.6881 and a 6-day high of 0.6244, respectively. The greenback had ended yesterday's trading at 0.6969 against the aussie and 0.6332 against the kiwi. The currency is likely to challenge support around 0.72 against the aussie and 0.66 versus the kiwi.

The greenback eased off to 1.2918 against the loonie, down from a 2-day high of 1.2996 it logged at 3:15 am ET. The greenback traded at 1.2919 per loonie at yesterday's close. Should the greenback slides further, 1.24 is likely seen as its next support level.

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