The U.S. dollar rebounded Thursday. What about other currencies?

The dollar rallied on Thursday, recovering some of yesterday’s losses as traders assessed mixed U.S. economic data. On the other hand, the sterling tumbled down as the U.K. authorities released their latest budget plan.

The U.S. currency has traded in the red in recent weeks. Federal Reserve officials’ comments, along with fresh inflation data, suggested that the central bank might slow the pace of its aggressive interest rate hikes soon. However, on Wednesday, U.S. retail sales data for October came in much stronger than analysts expected. That news supported the greenback today.

Consequently, the dollar index surged forward by 0.66% to 106.98 against the basket of six major currencies. During the previous weeks, the index has shaved off more than 6% since skyrocketing to a 20-year peak in September. Despite that, it is still 11% higher for the year thus far.

On Thursday, the euro plummeted by 0.63% versus the U.S. dollar. It exchanged hands at $1.033 at last after soaring to $1.048 on Tuesday, hitting its highest level since July.

Commonwealth Bank of Australia currency strategist Kim Mundy noted that forex markets have prepared for the Federal Reserve to change the course. However, the U.S. retail sales data challenges those expectations.

The greenback is consolidating as traders try to work out the direction of the U.S. economy – stated Simon Harvey, the senior FX analyst at Monex Europe. He also added that the positive consumption data suggests the economy isn’t experiencing drawbacks yet. But it’s unclear at this point whether that assessment will boost riskier assets or support the dollar.

How is the British Pound faring? 

The sterling declined slightly today as UK finance minister Jeremy Hunt issued tighter public spending and tax increases. He is trying to bring down inflation and restore the country’s economic reputation.

The Pound exchanged hands lower by 0.98% to $1.179 at last. The euro also climbed up by 0.38% versus the sterling at 87.59 pence.

Investors are focusing on speeches from several Fed officials today, looking for hints about future rate increases. According to St. Louis Fed President James Bullard, the central bank needs to continue hiking interest rates by at least another 1% point. The agency has already raised interest rates to a range of 3.75% to 4% from next to zero in March.

San Francisco Fed President Mary Daly also stated that she doubts the Fed will change its direction, adding that a pause in hiking was off the table on Wednesday.

On Thursday, the U.S. dollar jumped by 0.49% versus the Japanese yen. It traded at 140.28 after tumbling down earlier in the session. The currency shaved off 3.7% on Thursday last week when American consumer inflation data for October came in lower than economists expected. The Australian dollar also lost 1.22% to $0.666, and the Kiwi plummeted by 1.01% to $0.611 today.

What about the EM currencies? 

Most Asian currencies ended in the red today, along with EM stocks. Central banks in Indonesia and the Philippines increased interest rates in line with analysts’ expectations. However, the South Korean won tumbled as much as 1.5% on Thursday. It seemed set for its biggest decline in a month. Moreover, Malaysia’s ringgit and Thailand’s baht decreased by almost 0.2% each.

OCBC analysts stated that the markets are fluctuating between worrying about soaring inflation or economic recession. Considering that many central banks prioritize fighting inflation over supporting economic well-being, global growth prospects might experience a dramatic slowdown into 2023.

The Philippine central bank announced a 75-basis point (bp) increase. It plans to maintain its hawkish stance to hinder inflation. After this news, the peso rebounded and added 0.1%.

Meanwhile, Indonesia’s rupiah firmed after dropping by almost 0.5% earlier in the session. The currency remained on track for its sharpest daily plunge in over a month even though BI issued its third consecutive 50-basis-point rate hike.

Furthermore, most regional stock markets fluctuated. Shares in Manila and Indonesia surged forward by 0.4% and 0.2%, respectively. On the other hand, South Korean stocks shaved off 1%. Thai equities and Malaysia’s benchmark index also lost more than 0.3% each.

The Bank of Thailand stated that its economy would reach pre-pandemic levels towards the end of this year or in early 2023. According to surveys, the country’s economy grew at its fastest pace in more than a year during the last quarter, though.