Dollar holds near one-year high amid bets for earlier Fed rate hike

The dollar index, which measures the greenback against six rivals, eased slightly to 94.460 from Tuesday, when it touched 94.563 for the first time since late September 2020. ― Reuters pic
The dollar index, which measures the greenback against six rivals, eased slightly to 94.460 from Tuesday, when it touched 94.563 for the first time since late September 2020. ― Reuters pic

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TOKYO, Oct 13 — The dollar held near a one-year high versus major peers today, amid rising expectations the Federal Reserve will announce a tapering of stimulus next month, potentially following with interest rate hikes by mid-2022.

Three Fed policymakers said overnight that the US economy has healed enough to begin to scale back the central bank’s asset-purchase programme, including Vice Chair Richard Clarida.

Money markets now price about a 50-50 chance of a rate increase by July.

The dollar index, which measures the greenback against six rivals, eased slightly to 94.460 from Tuesday, when it touched 94.563 for the first time since late September 2020.

A surge in energy prices has fuelled inflation concerns and stoked bets that the Fed may need to move faster to normalise policy than officials had projected, sending two-year Treasury yields to their highest in more than 18 months overnight.

Higher US yields helped push the dollar to a three-year high against the yen yesterday at ¥113.785. The pair last traded at 113.485.

The euro changed hands at US$1.1541 (RM4.80), well within sight of the previous session’s US$1.1522, its lowest in nearly 15-month months.

Traders will focus on consumer price data later today for further insight into the timing of higher rates.

“CPI is the main economic draw” and “has the potential to see Fed rate hike expectations move again, one way or another,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney.

Most Fed policymakers continue to say inflationary pressures will prove transitory.

Governors Lael Brainard and Michelle Bowman are among the Fed officials due to speak later today, when the minutes of the central bank’s September meeting are also due to be released.

Sterling meandered in the middle of this month’s range, trading little changed from yesterday at US$1.3596.

The risk-sensitive Aussie dollar slipped 0.2 per cent to US$0.7335, retreating from yesterday’s one-month high at US$0.7384.

Bitcoin traded around US$56,500, after reaching a five-month high of US$57,855.79 at the start of the week.

(Reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa)

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