Dollar ascends to fresh 2-month high on inflation worry, Fed hike expectations
TLT•The dollar hit a fresh two-month high as traders weighed inflation concerns and the prospect of more Federal Reserve rate hikes. The dollar index rose 0.14% to 101.27, while expectations for a hike of at least 25 basis points at the Fed’s October meeting rose to 64.2%.
1. Dollar gains as yields rise
The dollar reached a fresh two-month high on Thursday, supported by hawkish comments from Federal Reserve officials and expectations for solid economic growth. Treasury yields eased after sharp moves in the prior session but remained elevated; the 30-year yield had reached its highest level since June 2004, and the 10-year yield its highest in almost two decades. Weekly initial jobless claims fell 1,000 to 197,000, below the 201,000 estimate.
2. Fed officials flag inflation
New York Fed President John Williams said another rate increase before year-end was a reasonable possibility if needed to curb inflation risks. Cleveland Fed President Beth Hammack said inflation pressures remained elevated, and Philadelphia Fed President Anna Paulson said additional hikes may be needed. Market expectations for a hike of at least 25 basis points at the October meeting stood at 64.2%, up from 55.4% a week earlier.
3. Oil and currencies
Oil prices rose about 4% as talks between the United States and Iran showed little sign of progress toward a peace deal. The euro slipped 0.05% to $1.1374, while the dollar gained against the Norwegian crown and Swiss franc and rose 0.3% against the yen to 158.75.
