The dollar traded near its highest since March on Friday, as optimism about a breakthrough in US debt ceiling talks and strong economic data reduced the prospect of a rate cut in the United States this year.
Democratic negotiators told President Joe Biden on Friday they were making “steady progress” in talks with Republicans aimed at avoiding US default, just days after Biden and top Republican Congressman Kevin McCarthy raised the government’s debt limit. underlined their determination to reach an agreement to extend the $31.4 trillion.
This stoked fears of an unprecedented and economically devastating default, prompting markets to revise their expectations for how high US interest rates might rise.
At the same time, data pointed to a still tight labor market, with the number of Americans filing new jobless claims falling more than expected last week, also raising hopes that the Federal Reserve would do more to control inflation. May raise rates again next month.
The dollar index was down 0.2% but hovering near a two-month high, having risen nearly 2.5% over the past two weeks as investors reassessed their expectations about what the central bank might do below. scrambled for.
US inflation does not appear to be coming down fast enough for the central bank to halt its tightening campaign, two Federal Reserve officials said Thursday.
Currency markets show traders now believe US rates will fall to 4.86% by the end of the year, compared to an expectation of 4.25% two weeks ago, indicating expectations of a wave of rate cuts How has it decreased?
The dollar was down 0.3% at 138.25 yen after hitting a six-month high of 138.745 yen.
The euro was up 0.2% at $1.0793, above its seven-week low, while sterling was up 0.1% at $1.243, not far from a one-month low.