Greenback jumps as Fed advances rate hike timeline

Finance | Reuters and staff reporter 18 Jun 2021

The dollar jumped to its highest in more than two months yesterday, while the yuan plummeted to a more-than-three-week low, after the us Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023.

At 6.30pm, the dollar index was up 0.5 percent on the day at 91.825, its highest since April 13.

The onshore yuan meanwhile weakened 303 basis points to 6.4277 per dollar yesterday, the lowest in more than three weeks.

The Federal Reserve on Wednesday began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying, and said the 15-month-old health emergency was no longer a core constraint on US commerce.

Signaling that broad changes in policy may happen sooner than expected, US central bank officials moved their first projected rate increases from 2024 into 2023, with 13 of 18 policymakers foreseeing a "liftoff" in borrowing costs that year and 11 seeing two quarter-percentage-point rate increases.

Seven of the officials see rates moving higher next year, opening the possibility of even more aggressive action.

Fed chairman Jerome Powell, who spoke to reporters after the release of the central bank's latest policy statement and economic projections, said there had also been initial discussions about when to pull back on the Fed's US$120 billion (HK$936 billion) in monthly bond purchases, a conversation that would be completed in coming months as the economy continues to heal.

In Hong Kong, the benchmark Hang Seng Index shrugged off the news to rise 121.75 points, or 0.43 percent, to close at 28,558.59.

But the Hong Kong Monetary Authority said the Fed talk about tapering bond purchases may impact market sentiment.

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