In response to a rise in the value of the US dollar on Friday, the Japanese yen suffered the most losses as market expectations that the Fed would need to take additional measures to curb inflation was confirmed by a two-day surge in stocks.
Several Federal Reserve officials cautioned investors not to grow overconfident in speeches and statements after this week’s little decline in inflation numbers. That realization followed.
The most recent instance was provided by Mary Daly, president of the San Francisco Federal Reserve, who said on Thursday that a rate increase of 50 basis points in September “makes sense” in light of recent economic data, particularly data on inflation, but she is prepared to raise the rate if necessary.
The Nasdaq and S&P 500 both fell on Thursday as additional signs of slowing inflation emerged. The dollar index rose by 0.1% to 105.210 while the euro dipped to $1.0311 during this time. The last known price of sterling was $1.2184, down 0.23% from the previous day, and the Japanese yen dropped 0.12% to 133.19 per dollar. To 137.340 yen, the euro climbed by 0.05%. Even the New Zealand dollar, whose value is predicted to rise sharply the next week, fell 0.16% to $0.643 against the US currency.
According to figures released on Thursday, the cost of items related to energy unexpectedly fell in July, which led to a decline in U.S. producer prices (PPI). That happened following the shocking report on Wednesday that the consumer price index (CPI) held unchanged in July due to a decline in fuel costs.
Such information did, however, briefly cause markets to worry about the Fed’s faster-tightening track to rebound back in comfort. Although the tech-heavy Nasdaq has recently recovered from its mid-June lows, it is still down around 18% for the year.
Since March, the Fed has increased interest rates by 225 basis points, and the dollar index has gained as well, up 10% so far this year. It fell as low as 131.74 overnight, a one-week low, from Wednesday’s high of 135.30 against the yen. It was back at 133.245 on Friday.