Chile: Dollar Rises Nearly $10 Amid Growing Pessimism in the U.S. Credit Market
Neel Kashkari's declarations begin to undermine hopes of an imminent reduction in U.S. monetary policy.
The dollar index climbed by 0.4%, while copper prices dropped by 1.3%, driven by the rise in long-term interest rates.
On Wednesday, the dollar saw an increase, driven by the decline in copper prices and a second session of massive sell-offs in long-term U.S. sovereign bonds.
By midday, the dollar rose by $9.01 to $906.53 in the Bloomberg series – reaching a peak of $910 this morning – bouncing back again after closing below the $900 mark. The dollar index surged by 0.4% to 105 points, while Comex copper fell by 1.42% to $4.79 per pound.
This uptick in the dollar’s value is mainly attributed to statements made by Neel Kashkari, which begin to undermine hopes of an imminent reduction in U.S. monetary policy. Specifically, the President of the Federal Reserve Bank of Minneapolis stated that “future interest rate cuts should be postponed until substantial progress can be seen in inflation.”
On Wednesday, the yield on the 10-year U.S. Treasury bond continued to climb, reaching 4.6% for the first time since early May. The 10-year treasury is a key instrument for economic and financial models worldwide.
Treasury bond prices are declining this morning, pushing yields higher as investors brace for Wednesday’s Treasury auction, following two tepid auctions yesterday. The increase in Treasury supply and tough talk from Fed officials have put pressure on bonds.
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