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18 Mar 2022

Dollar Set to Drop amid Fed Rate Hikes and Ukraine Diplomacy

The Index Today

The dollar is on track to plummet for the first time on Friday since the U.S. Federal Reserve implemented its first interest rate hike this week which is to be followed by six additional rate increases this year.

According to Reuters, while the euro gained from ongoing peace talks between the conflicting countries of Russia and Ukraine, the dollar dipped. Talks between the U.S. and China with the U.S. warning China against supporting Russia also compounded the situation.

The dollar index made a marginal rebound to 98.049 on Friday 2:46am ET, but is set to drop by 1.08% after it edged lower for the first time on Thursday since March 10. This comes in spite of the FOMC hiking rates by a quarter point and signaling similar hikes to follow after its six other policy meetings for the year.

Barclays Tokyo’s Senior FX Strategist Shinichiro Kadota said, “The dollar seems to be peaking with the market already pricing Fed hikes to a large extent, so the key going forward is going to be inflation: If it keeps surprising to the upside, then the question will be whether the Fed becomes even more hawkish."

©Photo: Bloomberg

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