The U.S. dollar hit a fresh high since March 2017 against the yen and traded close to a 16-month peak versus a basket of major peers on Wednesday, as a run of strong economic data boosted bets for earlier Federal Reserve interest-rate hikes.
Australia’s dollar weakened after wage data failed to strengthen the case for tighter monetary policy.
The greenback rose as high as 114.975 yen before last changing hands at 114.755.
The dollar index — which measures the currency against six rivals including the yen — traded at 95.871, not far from the overnight high of 95.978, a level not seen since July of last year.
· Money markets are currently pricing in a high probability of a Fed rate increase in June, followed by another in November.
“The U.S. economy looks to have shaken off the delta soft patch and is regaining forward momentum, albeit with heavy ongoing supply chain issues and reopening bottleneck,” Westpac strategists wrote in a client note, recommending buying the dollar index on any dips into the low 95 level.
“Hawkish comments from Bullard - voter next year — will leave markets comfortable pricing in Fed hikes (in) 2022, a stark contrast with Europe where renewed virus suppression measures are being implemented.”
· The euro languished near a 16-month low to the dollar as Europe suffered from worries about growth amid a renewed surge in Covid-19 cases.
European Central Bank President Christine Lagarde speaks later on Wednesday, after saying on Monday that tightening monetary policy now to rein in inflation could choke off the euro zone’s recovery.
One euro last bought $1.13245, mostly flat from Tuesday, when it dipped as low as $1.1309 for the first time since July 2020.
On Tuesday, RBA governor Philip Lowe again pushed back against market pricing for a rate hike next year, saying recent data and forecasts did not warrant such a move.
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