An Insight into the Rising Dollar and Its Expected Effects – Janet Yellen’s Guidelines

According to the media, the dollar has risen in thin trading. No doubt, it signifies a rush in the US new home sales. It is known that the policymakers from around the world are soon going to assemble in the U.S. mountain resort of Jackson Hole. The entire investors will meet with an expectation to acquire knowledge about the interest rate hike from the Fed. Yes, they are looking forward to the Federal Reserve Chair, Janet Yellen to offer a guideline about the next rate hike. After the last rate hike that took place in December, this hike is going to be the next after that.

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While talking on the basis of the CME’s FedWatch tool, the future markets expect 24% chances of the hike to be expected in the month of September. In addition to this, they expect a further increase of roughly 50% odds by the year end. While talking about the analysts, they expect that the interest rate hike in the month of September may result in dollar surge.

In the Words of Omer

Omer Esiner, the chief market analyst at Commonwealth Foreign Exchange in Washington has mentioned in a comment that despite the Fed officials hinting at the hike in the interest rate in early September, it is expected that Yellen would run on the same lines as hawkish Fed comments last week.

The majority of the traders are still skeptical about the announcement to be made by Yellen. To add on, it is true that the dollar was not much affected by the fall in the US current home sales in July. The news is going to be affirmed after the central bank event in Jackson Hole. However, the statistics have highlighted the uncertainty that surround the economy of the United States.

The further statements recorded were of New York Fed President William Dudley and Fed Vice Chairman Stanley Fischer. Their comments raised the hopes and expectations of the investors and made them think that Yellen might swing to a less cautious stance. It was seen that the officials were divided over the decision of raising the interest rates after the Fed policy meeting that was held in the month of July. Some officials highlighted the need of more concrete economic data to reach to the best decision.

The Bottom Line

It is true that while comparing the dollar with the currencies of the rest of the world, it increased up to 0.3 percent to 94.835. Yes, the dollar was higher up to 0.2% against the yen, which is at 100.47. Further, the Euro was down with 0.5% when weighed by the overall strength of the dollar.

In the words of Adam Cole, RBC Capital Markets currency strategist, the actual announcement is yet to be witnessed without which no real direction can be explored. Nonetheless, no investor is able to reach to a specific decision yet. It is expected that there will be a stir among the investors and the policymakers after the final declaration of Yellen.

About Janet Yellen

An American economist, Janet Yellen is the Chair of the Board of Governors of the Federal Reserve System. Sworn in on 3 February 2014, she was first woman to hold this position. Since she’s an economist, her ability to connect the economic theory to everyday life has been considered as one of her defining characteristics of her career.

She has also received numerous honors and awards since 2013. The most recent one was about a year ago in October 2015. Janet Yellen was ranked first in Bloomberg Markets’ annual list of 50 Most Influential Economists and Policymakers. 

Hence, there’s no doubt that her guidelines will definitely hold a lot of value!