Recently, the United States dollar has been gaining ground against major international currencies in the forex market. This sudden upward trend of the dollar has continued despite mixed reports about the US labor market. The report showed that the nation’s job openings dropped by 600,000 in October, the lowest in over two years. Many investors saw this labor drop as a correction in the market, leading to an increased appetite for the dollar.
Consider the dollar index on Wednesday, December 13th. You can see the dollar’s performance against other currencies in the FX market. It showed that the US currency beat six significant currencies to gain 0.5% this month. The index also highlights that the dollar gained about 0.019% overnight, describing the high demand for the world reserve currency.
The drop in job openings in the US indicates that high-interest rates strongly influence the nation’s economy. Businesses are now forced to reduce their workforce to break even or make a profit. Financial analysts expect this trend to continue until there’s a sudden change in the Fed’s policies.
The US Dollar And Other Currencies
In China, the yuan is surprisingly holding firm despite reports that the nation’s credit ratings will be downgraded to negative. This downgrade is set to be done by Moody’s rating agency. Major Chinese financial institutions are stepping in to protect the Yuan by selling a huge chunk of their dollar reserve.
Sources familiar with the situation report that Chinese banks are selling off their dollars on the spot market and trading them for Yuan on the onshore swap FX market. Traders are of the opinion that the Chinese dollar sell-off might influence the two-week greenback of the dollar. To learn how to take advantage of the Chinese dollar sell-off in the Forex market, read this article from Flowbank for more information.
According to financial reports from Reuters, there’s a high chance of the Feds cutting interest rates in March 2024. These cuts will undercut the dollar’s strength against the Euro and Pound Sterling. At the time of writing, the pound was down by 0.4%, trading against the dollar at $1.257. The AUD was down by 1.03%, trading at $0.6544, with the Japanese Yen the worst-performing major currency, pairing with $1 at 147.26. The decision by the Australian central bank to keep the interest rate at a decade-high contributed to the fall of the AUD from its four-month high.
On reports of whether the dollar will continue its bullish run after Friday’s announcements of the US November labor market, Lee Hardman, a senior money strategist, noted that, “We are at that turning point in the world economy and central bank policy that maybe it is creating more volatility over what will be the key drivers for forex markets over the next few months.” He added that with the United States economy expected to outperform predicted growth estimates, the dollar might begin to weaken, and job openings rise as early as the first quarter of 2024.
Cryptocurrency, USD, And Gold
In the crypto space, Bitcoin is on its strongest bullish run. The leading cryptocurrency has hit the $43,000 mark for the first time since April 2022. Crypto traders suspect this current rise in Bitcoin’s price resulted from the cryptocurrency halving event in 2024. Another reason for the heightened spirit around Bitcoin is the expected Fed approval of exchange-traded spot Bitcoin funds (ETFs). Overall, the cryptocurrency ecosystem has seen its market cap rise by more than 150% this year, which is good news for those predicting crypto as the future of world finance.
Gold gained 0.3% on the Gold Spot and the US futures market and was trading at $2,025.04 and $2,023.09, respectively. This is after reaching its high of $2135 against the USD on Monday, December 4, 2023.
Conclusion
If the US November job openings show a consecutive decrease in job openings, demand for the Dollar will continue to rise, contributing to its bull run in the forex market.