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U.S. dollar hits highest in nearly two years on expected rate increases – Metro US

U.S. dollar hits highest in nearly two years on expected rate increases

FILE PHOTO: Euro currency bills are pictured at the Croatian
FILE PHOTO: Euro currency bills are pictured at the Croatian National Bank in Zagreb

NEW YORK (Reuters) – The dollar surged to a nearly two-year high on Wednesday after minutes of the last Federal Reserve meeting reinforced expectations of multiple half percentage-point rate increases to control soaring inflation.

The dollar index, which measures the greenback’s value against six major currencies, climbed to 99.7780, its strongest level since late May 2020. It was last up 0.2% at 99.70.

Fed officials viewed the hefty rate increases as appropriate at future meetings, especially if inflation pressures intensify, minutes showed. They would also have preferred a 50 basic point rise in the target range for the federal funds rate at the March meeting.

“There’s a realization that some of the doves have come over to the 50 basis point hike territory and that is likely what we’re going to see at the next several meetings going forward as inflationary pressures remain elevated,” said Ryan Detrick, chief market strategist at LPL Financial in Charlotte, North Carolina.

“The Ukraine conflict uncertainty likely prevented a 50 basis point hike last month, so it could put a little cold water on extremely hawkish policy. But still, we know multiple hikes are coming very soon,” he added.

Fed officials also agreed to reduce the balance sheet by $95 million per month – $60 billion of its Treasury holdings and $35 billion of mortgage-backed securities – over three months, according to the minutes of the March meeting.

Analysts at Action Economics said the $95 billion balance sheet run-off was close to expectations of $100 billion per month.

The U.S. currency also hit the nearly two-year milestone on Tuesday after Fed Governor Lael Brainard, usually a more dovish policymaker, said she expected a combination of rate increases and a rapid balance sheet runoff to bring U.S. monetary policy to a “more neutral position” later this year. Further tightening would follow as needed, she added.

Analysts said the Fed minutes were less hawkish than Brainard’s comments.

The dollar held gains against the yen, which tracks U.S. two-year yields reflecting Fed policy expectations, traded slightly higher at 123.78.

Currency bid prices at 3:03PM (1903 GMT)

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

Previous Change

Session

Dollar index 99.5480 99.4860 +0.08% 4.061% +99.7780 +99.3140

Euro/Dollar $1.0904 $1.0906 -0.03% -4.09% +$1.0938 +$1.0874

Dollar/Yen 123.7650 123.6300 +0.13% +7.53% +124.0450 +123.4600

Euro/Yen 134.95 134.78 +0.13% +3.55% +135.4700 +134.7600

Dollar/Swiss 0.9327 0.9294 +0.36% +2.26% +0.9350 +0.9295

Sterling/Dollar $1.3074 $1.3072 +0.01% -3.33% +$1.3107 +$1.3046

Dollar/Canadian 1.2515 1.2486 +0.26% -0.99% +1.2558 +1.2479

Aussie/Dollar $0.7515 $0.7575 -0.79% +3.38% +$0.7593 +$0.7487

Euro/Swiss 1.0170 1.0134 +0.36% -1.92% +1.0204 +1.0136

Euro/Sterling 0.8338 0.8335 +0.04% -0.74% +0.8353 +0.8327

NZ $0.6921 $0.6945 -0.50% +0.95% +$0.6967 +$0.6900

Dollar/Dollar

Dollar/Norway 8.7845 8.7660 +0.64% +0.15% +8.8285 +8.7320

Euro/Norway 9.5811 9.5513 +0.31% -4.31% +9.6260 +9.5355

Dollar/Sweden 9.4711 9.4261 +0.45% +5.03% +9.5073 +9.3916

Euro/Sweden 10.3271 10.2810 +0.45% +0.91% +10.3479 +10.2573

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Stephen Culp; Editing by Kim Coghill, Kirsten Donovan and Nick Macfie)

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