WASHINGTON, Wednesday, November 8, 2023 — The U.S. dollar rebounded modestly Wednesday, halting a steep decline, as President Donald Trump downplayed its recent weakness while strong corporate earnings buoyed global stock markets ahead of a key Federal Reserve (Fed) rate decision.
Dollar Recovers Ground Amid Fed Anticipation
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The U.S. currency saw a slight recovery after its sharpest selloff since last April, though market sentiment remains cautious as investors await the Fed’s next move.
- The dollar index rose 0.25% to 96.16 after falling over 1% on Tuesday to a four-year low.
- President Trump described the dollar’s value as “great” despite its recent slump.
- The Fed is expected to hold rates steady, but faces scrutiny amid investigations and potential leadership changes.
- Strong earnings from ASML and anticipation of reports from Meta and Tesla supported stock markets.
The dollar edged away from four-year lows, but fragility persisted following the most significant selloff since President Trump’s imposition of tariffs rattled markets last April. European share markets experienced declines, while U.S. stock futures signaled a positive opening for Wall Street. Japan’s Nikkei index also saw a slight increase, with the MSCI World Stock Index remaining near record highs.
“Last week when there seemed to be a flight from the U.S. in general, you had equities falling, Treasuries taking hits, and the dollar falling. Now it’s more of a dollar story,” explained Jan von Gerich, chief markets analyst at Nordea.
The Federal Reserve is widely anticipated to maintain current interest rates at its meeting, which is occurring against a backdrop of a Trump administration criminal investigation into Fed Chair Jerome Powell, efforts to remove Fed Governor Lisa Cook, and the upcoming selection of Powell’s successor in May. “The most interesting thing about the Fed tonight is that Powell could now say something more on this political pressure because he’s refrained from all of that so far,” a source stated.
FX Markets in Focus
The dollar index, measuring the U.S. currency against six major rivals, increased by 0.25% to 96.16 after a more than 1% drop on Tuesday, reaching a four-year low. President Trump stated on Tuesday that the dollar’s value was “great” when questioned about its recent decline.
Traders interpreted this statement as a signal to accelerate the selling of the dollar, particularly as markets anticipate potential coordinated currency intervention by U.S. and Japanese authorities to stabilize the yen. The dollar’s decline propelled the euro above $1.20 for the first time since 2021, briefly pushed the Australian dollar above 70 cents to a three-year high, drove gold to a new peak, and boosted commodity prices.
“Often officials push back against abrupt currency moves but when the President expresses indifference or even endorses the move it emboldens USD sellers to keep pushing,” said Steve Englander, head of global G10 currency research at Standard Chartered in New York.
Earnings Season Continues
ASML, the leading global supplier of computer chip equipment, reported fourth-quarter bookings that exceeded expectations, indicating continued strong demand for artificial intelligence technologies. Its shares rose 5%, outpacing a generally stable European market.
Wall Street is also awaiting earnings reports from Meta and Tesla following the close of trading, in addition to the Fed’s announcement. The weaker dollar also contributed to a record high for gold, surpassing $5,280 an ounce, and pushed benchmark Brent crude futures to a four-month high above $68 a barrel.
In Asia, unexpectedly high inflation data in Australia for December has increased expectations for a rate hike as early as next week. ANZ and Westpac have revised their forecasts to predict a hike, joining Australia’s other major banks in anticipating an increase.
Indonesia’s equity market experienced a significant drop of 7% after MSCI, an index provider, expressed concerns regarding opaque ownership and trading practices, leading to a suspension of updates to Indonesian entries in its tracked products.
