After strong gains in recent days, the price of the dollar extended its rise on Tuesday, as bets rose that the Federal Reserve will implement a higher than expected increase in interest rates in the United States to contain the strong inflation that affects this country, increasing the chances of a recession in the largest economy in the world.
The U.S. currency rose $6.61 to $869.50 after posting a session high of $873.32 at 11:43 a.m., accumulating an increase of $47 over the past four days.
Thus, the currency reached its highest value since December 21 when it closed at $871.2 and was only $6.5 from the all-time high of $876 recorded on December 20 of the year. last.
“The price of the dollar has made strong gains this week, amid external factors that have been key to the exchange rate. Elevated consumer inflation data in the US has prompted shifts in projections for the Fed, where a more aggressive rate hike is expected at the meeting that ends Wednesdayhaving several international financial entities expecting a rate hike of 75 basis points, whereas 50 points were expected until last week,” said Ricardo Bustamante, head of business research at Capitaria.
JPMorgan Chase & Co. and Wells Fargo & Co. are among a series of banks that now expect the Fed to raise interest rates by 75 basis points this week, which would be the largest increase since 1994.
Also yesterday afternoon, the Wall Street Journal reported that the Federal Reserve is so preoccupied with inflation that it is likely that the interest rate will be raised to as much as 75 basis points.
In this regard, Francisco Roman, principal analyst at XTB Latam, pointed out that “Although this is a completely speculative report, the market suggests that the Fed has at times taken advantage of WSJ reports to leak new strategies.”
And in this scenario, the rising dollar could put additional pressure on inflation in Chile. Experts consulted by Pulso agree that if it stays above $860, the impact will be felt in the CPI for July and beyond with up to half a point extra. In May, the CPI rose by 1.2% and has accumulated an increase of 11.5% in twelve months, its highest level since mid-1994.
To the record high US inflation released on Friday, which showed the 12-month measure hit a 40-year high in May, producer price data was added earlier, also matching in the fifth month of the year, which, although in line with what was expected by the market, confirmed the outlook that the high levels will remain for an extended period.
The producer price index for final demand rose 0.8% from April and 10.8% from a year earlier, according to Labor Department data released Tuesday. This followed a 0.4% advance the previous month.
In this context the dollar indexwhich measures the behavior of the currency against a basket of six liquid currencies, including the euro, advanced 0.24% to 105.22 points.
The rise in the exchange rate was also supported by the fall in the price of copper, the country’s main export commodity, amid concerns over global economic performance adding to uncertainty over the possible impact. of the increase in Covid-19 infections in China. , the world’s largest metal consumer.
The metal’s spot price fell 0.29% to US$4.2063 per pound on the London Metal Exchange, posting its lowest value since May 13.
Three-month futures, meanwhile, fell 1.19% to US$4.16 a pound on the London Metal Exchange.
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