Dollar soars on US inflation surge

Dollar soars on US inflation surge

Team Ambitiousbaba and AB are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is “Dollar soars on US inflation surge”

The dollar shoot a 16-month high on Thursday (today) and bond and stock markets staggered after the strongest US inflation reading in over three decades fuelled expectations of Fed interest rate hikes next year.

One day before US consumer price data was released which showed the biggest gain in four months, lifting the annual increase to 6.2 percent, the strongest year-on-year rise since November 1990 and following a 5.4 percent bounce in September.

The dollar pushed the euro below $1.15, leaving the next major chart support level down at $1.12. European stocks nudged higher, sensing a competitiveness boost, but the yen was falling towards a four-year low at 114.15 per dollar.

US Treasury yields have jumped by the most since February to nearly 1.6 percent. US real yields, which take inflation take into consider, dipped to record lows and the five-year breakeven rates hit a record 3.113 percent.

Effect on China and Japan’s stock markets:

China and Japan’s stock markets also lifted overnight supported by property developer China Evergrande Group which making another last-minute bond coupon payment to ward off default and by a weaker yen. It helps Japanese exporters.

Leading with real estate stocks Chinese blue chips called up 1.28 percent. Japan’s Nikkei ended up 0.6 percent as the yen weakened as far as 114.15 per dollar from as strong as 112.73 earlier this week.

INFLATION

US stock futures marked off 0.1 percent. On Wednesday, the S&P 500 (standards & poors) sank 0.8 percent which is the worst day in over a month.

The Fed has said prices will fall once supply chokepoints start easing and last week urged patience, reiterating that high inflation is “expected to be transitory”.

The money market now prices a first Fed interest rate increase by July.

The main energy commodities have also been approaching inflation. As US President Joe Biden said his administration is looking for ways to reduce energy costs, oil stabilized in London after pulling back sharply from near seven-year highs the previous day.

Brent crude futures climbed up 64 cents to $83.27 a barrel, but down from as high as $85.50 on Wednesday and October’s three-year peak of $86.70.

Question & Answer:

Q1. What is the meaning of term ‘inflation’?

Ans. It represents the rate of increase in prices to particular given period of time. If inflation goes up prices of all items and commodities are going up and if it is down prices are going down with it.

Q2. What is the Fed?

Ans. Fed is a short form of the Federal Reserve System. It is the central bank and monetary authority of USA.

Q3. What is the ‘yield’?

Ans. In general way it means total earnings of an investment. It shows interest of bonds, government securities, Central bank’s securities etc.

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