Dollar ascends to fresh 2-month high on inflation worry, Fed hike expectations
FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo
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NEW YORK, Sept 24 : The dollar hit a fresh two-month high on Thursday, boosted by growing views for Federal Reserve interest rate hikes after hawkish comments from several central bank officials and expectations for solid economic growth.
Treasury yields calmed after sharp moves in the prior session but remained at elevated levels that saw the 30-year US bond yield hit its highest since June 2004 and the benchmark 10-year note at its highest in almost two decades following economic data that indicated a jump in business activity along with mounting price pressures.
Data on Thursday showed weekly initial jobless claims dipped by 1,000 to 197,000, below the 201,000 estimate of economists polled by Reuters, indicating a steadying labor market.
Adding to inflation concerns, oil prices were up about 4 per cent on Thursday on little signs of progress for a peace deal in talks between the US and Iran.
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Since the central bank’s rate hike of 25 basis points last week to the 3.75 per cent-4.00 per cent range, several Federal Reserve officials have flagged the possibility of more rate increases if inflation does not moderate.
“We’ve got the two-year at the top of a post-2008 range, and we’ve got the 30s that are 22-year high, and the ten-year at a 19-year high. I don’t think FX traders need to know too much more than that,” said Joseph Trevisani, senior analyst at FXStreet in New York.
“The Fed knows that this is a supply shock for oil, they’re looking beyond that, one of the things they’re looking at is the projected growth from the economy in the third quarter.”
The dollar index, which measures the greenback against a basket of currencies, was on track for a fourth straight daily advance as it rose 0.14 per cent to 101.27 after hitting 101.34.
FED SPEAKERS KEEP DOOR OPEN TO HIKES
Comments from several Fed officials on Thursday reinforced the need to combat inflation.
New York Federal Reserve President John Williams said on Thursday it was reasonable to think that the US central bank might need to raise interest rates again before the end of the year to help bring down inflation risks.
In addition, Federal Reserve Bank of Cleveland President Beth Hammack said that inflation pressures remain elevated and the longer this situation persists, the harder it will be to bring price pressures back to target, while Philadelphia Federal Reserve President Anna Paulson said additional interest rate hikes may be needed.
Expectations for a rate hike of at least 25 basis points at the Fed’s October meeting stood at 64.2 per cent, up from 55.4 per cent a week ago, according to CME FedWatch.
EUROPEAN CURRENCIES UNDER PRESSURE
The euro was off 0.05 per cent at $1.1374. European Central Bank board member Isabel Schnabel resigned on Thursday to take on a senior role at the International Monetary Fund, kicking off a lengthy reshuffle atop Europe’s most powerful financial institution.
Norway’s central bank raised interest rates on Thursday and Sweden’s signaled it was likely to follow suit before the end of the year, as central bank policymakers around the world grapple with rising inflation from a war-driven energy shock.
Against the Norwegian crown,, the dollar strengthened 0.27 per cent to 9.503 while the Swedish crown weakened 0.1 per cent versus the dollar to 9.92.
Against the Swiss franc, the dollar strengthened 0.4 per cent to 0.828 after climbing to 0.8289, its highest since May 2025 as the Swiss National Bank stood apart from other central banks by keeping its benchmark interest rate on hold and stating that rising inflation caused by war in the Middle East was not a threat to Swiss price stability.
The Japanese yen weakened 0.3 per cent against the greenback to 158.75 per dollar after Japanese Finance Minister Satsuki Katayama said the principles underpinning the coordinated Japan-US currency intervention in July remain intact, but sentiment remained fragile after last week’s Bank of Japan rate hike failed to convince investors that a faster tightening cycle is in store.
Source: Reuters
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