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16 Dec 2021

Dollar Edged Down as Investors Absorb Fed’s Policy Decision in Asset Tapering

The Index Today

Thursday morning in Asia, the dollar was seen down in response with the U.S. Federal Reserve tightening its monetary policy in a hawkish pivot.


The U.S. Dollar Index edged down 0.13% to 96.360 by 10:39 PM ET (3:39 AM GMT). The USD/JPY pair inched up 0.09% to 114.11. The AUD/USD pair was down 0.13% to 0.7158, along with the data of jobs from the Australian Bureau of Statistics showing that the employment change was at 366,100, the full employment change at 128,300, and the unemployment rate was 4.6%, in November.


The NZD/USD pair was down 0.19% to 0.6765.

The USD/CNY pair was flat at 6.3675 and the GBP/USD pair inched down 0.08% to 1.3252.

According to the Fed policy decision meeting on Wednesday, they will accelerate its asset tapering program to $30 billion per month. The central bank also kept its interest rate unchanged at 25% but will have three quarter-point interest-rate increases by the year of 2022 next year, then another three in 2023, and two more in 2024 to respond with the inflation.

Fed Chair Jerome Powell said, “The economy no longer needs increasing amounts of policy support.” Comparing the near-depression situation at the beginning of COVID-19 in 2020 with current rising prices and wages, as well as rapid improvement in the job market.

NAB head of FX strategy Ray Atrill told Reuters, “It suggests to me that markets were positioned for the Fed being more hawkish than survey expectations would have you believe. Also, that risk assets took the latest pivot so well reinforces the fact that the U.S. dollar and risk sentiment seem to be negatively correlated.”

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