Reuters/Kim Hongji/File photo
This image, taken in Seoul back in December 2015, showcases a US $100 bill alongside other currencies. On Thursday, the euro and yen appreciated against the US dollar as major central banks opted to maintain interest rates amidst concerns regarding inflation from rising oil prices related to ongoing Middle East conflicts.
NEW YORK/LONDON>> On Thursday, the euro and yen strengthened against the US dollar as key central banks decided to keep interest rates steady amid worries about inflation driven by increasing oil prices due to tensions in the Middle East.
The European Central Bank held interest rates steady, though it emphasized the need to monitor growth and inflation risks tied to rising oil prices. The euro rose by 1.18%, reaching $1.1585.
Meanwhile, the Bank of Japan didn’t change rates either but maintained a restrictive monetary policy stance. The yen appreciated by 1.4%, now valued at 157.61 yen per dollar.
The Bank of England also voted unanimously to maintain current borrowing costs, highlighting inflation risks associated with ongoing conflicts in the Middle East. The pound increased by 1.4%, settling at $1.34360.
“Central bankers globally are assessing the impact of inflation and the anticipated output changes, questioning their confidence levels,” stated Steve Englander, who leads G10 currency research at Standard Chartered in New York.
The Federal Reserve similarly held rates steady on Wednesday, predicting continued inflation, stable job rates, and a single rate cut anticipated later this year.
The U.S. dollar index, which gauges the dollar’s strength against a selection of six currencies, recently fell by 1% to 99.20.
This index remains close to its highest level in ten months, as the current conflicts and rising oil prices have driven many investors toward safe-haven US assets.
Englander added, “The Fed showed some certainty, but Chairman Powell remained cautious, wanting to assess the real implications of the war. Other central banks, like Canada, showed neutrality while others maintained a hawkish stance. The markets seem to perceive more inflation risks in the U.K. than in the U.S., likely due to the former being an energy importer with a less adaptable economy.”
Increased oil prices were noted as Iran attacked energy sites throughout the Middle East, significantly heightening the situation following the assault on Israel’s South Pars gas field. Brent crude oil prices rose by 1.18%, closing at $108.65.
The Australian dollar gained 0.83% to $0.70810 after reports indicated a slight uptick in the unemployment rate to 4.3%, which exceeded market forecasts.
The Reserve Bank of Australia issued a warning, indicating that the Middle East conflict poses a substantial risk to the Australian economy. Contrary to others, the RBA raised interest rates again this past Tuesday.
The Swiss franc depreciated after the Swiss National Bank opted to leave rates unchanged, also conveying readiness to intervene to manage recent currency gains. Last noted, the euro gained nearly 0.50% over the franc, priced at 0.91285 francs.
Against the Swiss franc, the dollar dropped by 0.63%, now at 0.78830 francs.
As expected, the Bank of Canada left its key policy interest rate steady on Wednesday. The Canadian dollar fell slightly, decreasing by 0.07% against the US dollar to 1.374 Canadian dollars.
“No surprises emerged from the seven G10 central bank meetings over the past couple of days, with all maintaining their positions as anticipated (including the earlier RBA rate hike), and the considerable but uncertain impact from the energy shocks in the Middle East was clearly emphasized,” noted Goldman Sachs analysts led by Stuart Jenkins in a report for investors.
“While the general guidance from these meetings leaned towards highlighting inflation risks rather than growth risks, there were notable differences across the central banks.”
In the realm of virtual currencies, Bitcoin saw a decrease of 1.16%, now at $70,407.69. Ethereum likewise fell by 1.92%, currently priced at $2,146.33.
