Dollar advances to one-year high; U.S. debt ceiling impact muted
The dollar surged on Wednesday to a one-year high against major currencies, boosted by increased expectations for a reduction in the U.S. Federal Reserve’s asset purchases starting in November and an interest rate hike, possibly in late 2022.
The greenback also fared well despite an impasse in Washington over the U.S. debt ceiling that threatened to plunge the government into a shutdown.
The world’s largest reserve currency, seen as a safe-haven bet at times of market stress, has strengthened in recent days as investors instead focused on fears of a global slowdown, a rise in energy prices and higher U.S. Treasury yields.
Traders are also concerned the Fed will start to withdraw policy support just as global growth slows.
The dollar index - which measures the U.S. currency against a basket of six major currencies - rose for the fourth consecutive day, to 94.112, its highest since early November last year. It was last up 0.4% at 94.115.
Erik Nelson, macro strategist at Wells Fargo in New York, sees a further 2% to 3% upside in the dollar index.
The euro was among the currencies to lose ground, falling below the $1.16 level , the lowest since late July 2020. It last traded down 0.7% at $1.1596.
The yen showed little reaction to the election of Fumio Kishida as leader of Japan’s ruling Liberal Democratic Party, which put him on course to become the country’s next prime minister.
TREASURIES-Investors slow selling, eye talks in Washington
Traders slowed their selling of U.S. Treasuries on Wednesday, leaving yields little changed, as they kept an eye on government budget talks in Washington.
The benchmark 10-year yield was up 1 basis point at 1.5462% while yields on shorter-term debt were lower. After four consecutive sessions in which the 10-year yield rose, the yield fell as low as 1.494% on Wednesday morning before finding support.
Analysts said investors were taking stock after Treasury market moves of recent days and trying to forecast how negotiations on U.S. spending plans might resolve.
Reference: Reuters, CNBC
Thai
Eng