The dollar rose to its highest level in almost two months versus major peers on Thursday after the Federal Reserve unexpectedly brought forward its projections for interest rate hikes into 2023.
The dollar index, which tracks the currency against six rivals, rose to as high as 91.484 in Asia for the first time since April 19, following a nearly 1% surge overnight, the biggest gain since March of last year.
Only New Zealand’s kiwi made any meaningful headway against the dollar among major currencies on Thursday, climbing 0.6% after data showed New Zealand’s economy grew much faster than expected in the first quarter. The kiwi had tumbled more than 1% on Wednesday.
The Federal Reserve on Wednesday began closing the door on its pandemic-driven monetary policy as officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying, and said the 15-month-old health emergency was no longer a core constraint on U.S. commerce.
A majority of 11 Fed officials pencilled in at least two quarter-point interest rate increases for 2023, even as they pledged in their statement to keep policy supportive for now to encourage an labour market recovery.
The benchmark 10-year Treasury yield was at 1.5890% in Asia, after rallying to as high as 1.5940% from as low as 1.4820% on Wednesday.
The dollar climbed to an almost two-month high of $1.1984 per euro on Thursday, extending its gain of about 1% from the previous session.
It strengthened to as high as 110.825 yen, a level not seen since April 1, adding to a 0.6% rally overnight.
The Australian dollar dipped to $0.75975, the lowest since April 13, before trading 0.3% higher to recoup some of Wednesday’s 1% tumble.
Sterling slipped to the lowest since May 7 at $1.39745, and the Canadian dollar hit the weakest since May 5 at C$1.2292, before trading little changed in the Asian afternoon.
Cryptocurrencies were also hurt by the dollar’s strength, with bitcoin hovering around $39,000 following a 4.5% slide on Wednesday, and ether at $2,438 after a 7% selloff.
· Yuan eases to 3-week low after Fed takes more hawkish outlook
China's yuan weakened on Thursday to a more-than-three-week low against a broadly stronger dollar as the U.S. Federal Reserve adopted a more hawkish outlook.
The dollar rose to its highest level in almost two months versus major peers after the Fed brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy.
In the spot market, onshore yuan opened at 6.3977 per dollar and eased to a low of 6.4258, the softest level since May 24. By midday, it was changing hands at 6.4220, 251 pips weaker than the previous late session close.
Reference: CNBC, Reuters
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