Dollar driven to five-week high by Fed rate hike forecasts

Dollar driven to five-week high by Fed rate hike forecasts
Dollar driven to five-week high by Fed rate hike forecasts
© Reuters. FILE PHOTO: Chinese Yuan and U.S. dollar banknotes are seen in this illustration taken February 10, 2020. REUTERS/Dado Ruvic/Illustration


By Karen Brettell

NEW YORK (Reuters) – The hit a five-week high and posted its biggest weekly gain since April 2020 on Friday as investors adjusted for the likelihood that the Federal Reserve will keep hiking rates to battle inflation.

The U.S. central bank needs to keep raising borrowing costs to tame decades-high inflation, a string of its officials said on Thursday, even as they debated how fast and how high to lift them.

“They still have their work cut out for them and I don’t think the market was really positioned that way after the July FOMC,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, referring to the Fed’s Federal Open Market Committee meeting. “It’s really all about getting inflation back to target.”

The dollar index rose 0.61% to 108.13, its highest since July 15, while the euro dropped 0.54% to $1.0033, its lowest since the same date.

The greenback gained 0.73% to 136.87 against the Japanese yen, the strongest since July 27. Sterling tumbled 1.03% to $1.1813 and had its biggest weekly drop against the dollar since September 2020.

The Fed is seen as having more room to hike rates than central banks of other large economies which are more fragile.

“For the USD to weaken meaningfully, the Fed has to get more concerned about growth than inflation, and we are not there yet,” Bank of America (NYSE:) analyst Michalis Rousakis said in a report on Friday.

“Meanwhile, we expect the (European Central Bank) to stop hiking next year on concerns around growth and/or spreads. EUR is also exposed to the much worsened terms of trade and the slowdown in China,” Rousakis said.

The euro was also dented on Friday after Gazprom (MCX:) said the Nord Stream 1 pipeline, which supplies gas from Russia to Europe under the Baltic Sea, will be shut down from Aug. 31 to Sept. 2 for maintenance.

Fed funds futures traders are pricing in a 55% expectation that the Fed will hike rates by 50 basis points in September and a 45% probability of a 75 basis points increase.

U.S. central bank officials have “a lot of time still” before they need to decide how large an interest rate increase to approve at their Sept. 20-21 policy meeting, Richmond Fed President Thomas Barkin said on Friday.

Fed Chair Jerome Powell will update the market on his views at the annual Jackson Hole symposium on Aug. 25-27.

slipped to its lowest since September 2020 at 6.8199 per dollar in onshore trading after the central bank set a much-weakened midpoint guidance, with traders expecting further downside.

In cryptocurrencies, bitcoin fell 8.73% to $21,188. Ether was down 8.34% to $1,693.

“Weakness has seeped into the crypto sphere as speculators retreated from highly risky assets,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.


Currency bid prices at 3:00PM (1900 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change


Dollar index 108.1300 107.4900 +0.61% 13.032% +108.2100 +107.4800

Euro/Dollar $1.0033 $1.0087 -0.54% -11.75% +$1.0096 +$1.0033

Dollar/Yen 136.8650 135.8950 +0.73% +18.91% +137.2200 +135.7150

Euro/Yen 137.33 137.06 +0.20% +5.38% +137.9600 +136.9500

Dollar/Swiss 0.9592 0.9570 +0.18% +5.11% +0.9598 +0.9553

Sterling/Dollar $1.1813 $1.1936 -1.03% -12.65% +$1.1936 +$1.1793

Dollar/Canadian 1.2994 1.2945 +0.38% +2.78% +1.3009 +1.2947

Aussie/Dollar $0.6867 $0.6914 -0.67% -5.52% +$0.6919 +$0.6860

Euro/Swiss 0.9622 0.9650 -0.29% -7.20% +0.9669 +0.9613

Euro/Sterling 0.8492 0.8455 +0.44% +1.10% +0.8511 +0.8453

NZ $0.6167 $0.6257 -1.43% -9.89% +$0.6257 +$0.6168


Dollar/Norway 9.8155 9.6840 +1.37% +11.43% +9.8190 +9.7535

Euro/Norway 9.8478 9.8150 +0.33% -1.65% +9.8690 +9.8205

Dollar/Sweden 10.5967 10.4977 +0.39% +17.51% +10.5992 +10.5007

Euro/Sweden 10.6322 10.5908 +0.39% +3.89% +10.6421 +10.5973



Leave a Reply

Your email address will not be published. Required fields are marked *

New Brokers
2.8 rating
Buy & sell Crypto in minutes
3.0 rating
Note: Investing involves risks. You can lose your deposit. We advise you to only invest in financial products which match your knowledge and experience.
2.0 rating
Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform.
4.3 rating
eToro is the world’s leading social trading platform, with thousands of options for traders and investors.
Risk Warning: The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory or other services by AdonFinance. In addition, the content of the website offers no opinion with respect to the suitability of any security or any specific investment. Trading foreign exchange, stocks, cryptocurrencies and commodities is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against traders. Before any investment with any broker you need to carefully consider your targets, previous experience, and risk level. Forex trading can result in the loss of your money, as a result, you are expressly cautioned that you should never invest or trade with money that you cannot afford to lose. For the avoidance of doubt, AdonFinance's service provides Brokers reviews in the Financial market. AdonFinance, its subsidiaries, agents or affiliates will assume no responsibility whatsoever for your trading activity. © Copyright 2021 AdonFinance