Dollar surges in September, leaving euro lagging
TLT•The dollar gained nearly 2.2% against the euro in September, its largest monthly advance versus the single currency in 14 months, as stronger U.S. growth and rising rate expectations supported it. The euro traded near $1.135, close to a low touched in the previous session.
1. Dollar gains on growth
The dollar hovered near its highest level of the year against the euro on Wednesday and was on track for a third consecutive quarterly advance. Resilient U.S. economic data and persistent inflation prompted the Federal Reserve to raise rates this month for the first time in three years, while traders priced in a more aggressive policy path than in the euro zone.
2. Rate expectations shift
Some expectations for Fed rate increases eased after New York Fed President John Williams said there was “no need for urgency” in raising rates. Traders cut the probability they assigned to a 25-basis-point increase next month to about 42%, from around 70% earlier in the week; markets expected the European Central Bank to hold rates in October.
3. Sterling and yen moves
Sterling rose about 0.5% to $1.3292 after revised data showed the British economy grew faster than previously estimated in the second quarter. The dollar was near a 17-month high against the Swiss franc, while it fell 1.6% against the yen in September and nearly 3.3% in the third quarter. Investors were also watching the Fed’s preferred inflation measure, the August Personal Consumption Expenditures index.
