LONDON – The dollar edged closer to its highest level in a year against a basket of peers on Thursday on rising hopes the Federal Reserve would ease stimulus from November, while a jump in iron ore prices boosted the commodity-linked Australian dollar. .
The safe haven greenback has made sharp gains in the past two sessions on worries that the Fed may withdraw economic support as global growth slows and high inflation remains high. A rise in bond yields added to the strength of the currency.
Its rise comes despite a standoff in Washington over a US debt limit, which threatens to shut down the government.
The dollar index – which measures the currency against a basket of six rivals – was at 94.294, little changed from Wednesday, when it rose to 94.435 for the first time since late September last year.
The yield on the benchmark 10-year Treasury note stood at 1.5289 per cent, hitting a near mid-June high of 1.5670 per cent on Tuesday.
“The move (in the dollar index) was broad and there were no particularly large increases in US yields on that day, nor was there a reduction in major equity corrections,” ING said in a note to clients. “It appears the move may be driven by quarter-end corporate and institutional flows.”
The dollar bought 111.91 yen, little changed since Wednesday, when it hit 112.05 for the first time since February 2020. It was on track for its worst monthly performance since March.
The euro was mostly flat at $1.16045, close to Wednesday’s 14-month low of $1,15,895.
Speaking at a European Central Bank forum on Wednesday, Fed Chair Jerome Powell, ECB President Christine Lagarde and Bank of England Governor Andrew Bailey said they were monitoring inflation following a rise in energy prices and production bottlenecks.
The 3-month euro-dollar cross currency swaps on Wednesday tightened slightly to -21.25 basis points after reaching their widest level since December 2020.
“A sudden sharp dollar bid in the 3-month EUR/USD cross-currency market indicates that foreign banks (not foreign banks in the US) are operating in the dollar market with domestic funds and dollars for funding at the end of the quarter.” There are shortages and scuffles,” he said. Sebastian Galli, senior macro strategist at Nordea Asset Management.
“This is a sure sign of excessive leverage in foreign financials in the USD market (local affiliates are independently regulated by the US).”
The risk-sensitive Australian dollar gained 0.5 per cent to $0.7206 after falling 0.9 per cent overnight as iron ore prices rose ahead of the Golden Week holiday in China, Australia’s top trading destination.
Even a rebound in monthly Chinese services data “has gone some way to allay fears that the apparent slowdown in China’s growth of late is turning to the downside,” said NAB’s head of FX strategy, Ray Attrill. .
Sterling rose 0.1 per cent to $1,34,357, but fell overnight to a nine-month low of $1.3412 on rising natural gas prices and concerns about a nearly week of gasoline shortages in the UK.
Cryptocurrency markets saw a slight improvement in overall risk sentiment after days of gloom, as bitcoin rose 5% to $43,567 and ether jumped 6.4 percent to $3,034.09.
Both coins are down between 20 percent-27 percent from their September peak.
by Ritwik Carvalho
This News Originally From – The Epoch Times