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Dollar steadies near four-week high as Fed hike odds rise
The dollar index was around 101.5 after hitting its highest since July 1, with markets pricing nearly a 40% chance of a 25-basis-point hike on Wednesday.
The U.S. dollar steadied near a four-week high on Tuesday as traders weighed the possibility of a Federal Reserve interest rate hike this week, even as falling oil prices offered some relief for inflation concerns, Reuters reported. The dollar index, which tracks the greenback against a basket of currencies including the yen and the euro, was about flat at 101.50 after touching its highest level since July 1. The euro edged up 0.05% to $1.1370, while the dollar traded at 163.745 yen and sterling rose 0.1% to $1.330. Reuters also said the dollar’s firmness is tied to a sharp repricing of Fed expectations, with Treasury yields rising since April as the U.S.-Iran conflict stoked inflation concerns and as Fed expectations turned more hawkish following Kevin Warsh’s debut. Dominic Bunning, head of G10 FX strategy at Nomura, said the move in U.S. yields has been a key driver of dollar moves. Markets are pricing a nearly 40% chance of a 25-basis-point rate increase on Wednesday, up from about 20% a week earlier, according to LSEG data, with almost a 95% probability of a hike by September. Attention this week is also on U.S. second-quarter GDP data and the Fed’s preferred inflation measure, core PCE.
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Latest closeDollar index 101.51 ▲0.0%