On Monday, the US dollar rose to a 20-year high against other major currencies as Fed Chair Jerome Powell signalled that interest rates will be kept high for longer to combat inflation.
Related: Hong Kong property prices declined in May due to rising interest rates.
The dollar index reached 109.48, a new two-decade high.
That put European peers in the doldrums as hawkish comments from the ECB raised hopes for a huge rate hike in September.
The euro fell 0.25 percent to $0.99415 in early European trade, approaching 20-year lows, while the pound fell to a 2-1/2-year low.
The holiday closed London markets.
Powell said the Fed will increase rates as high as required to constrain growth and maintain them there “for some time” to bring down inflation, which is more than three times the Fed’s 2% objective.
Societe Generale’s Kenneth Broux (OTC: SCGLY) said Powell’s statements encouraged a higher Fed funds rate for a longer duration. “It’s premature to assume the Fed will drop rates in 2023.”
Money markets responded by betting on a more aggressive Fed rate rise in September, with a 75% likelihood.
The two-year Treasury yield hit a 15-year high of 3.49 percent, lifting the dollar.
Related: The dollar rises on rising yields; the pound falls on political unrest.
The dollar touched its highest level since July 21 at 138.81 yen, while the offshore yuan plummeted to a two-year low of 6.9321 per dollar.
Sterling slipped to $1.1649 and was last down 0.5% at $1.1676.
“This week, the (U.S. dollar index) will climb much higher towards 110 points,” said Carol Kong, senior associate for currency strategy and international economics at Commonwealth Bank of Australia (OTC:CMWAY).
Isabel Schnabel, Francois Villeroy de Galhau, and Martins Kazaks urged robust policy action at the Jackson Hole Symposium.
Despite the possibility of a hefty ECB rate hike in September, the euro has suffered due to a recession-risking oil crisis. From August 31 to September 2, Gazprom (MCX: GAZP) will suspend natural gas exports to Europe.
As risk-off sentiment dominated international markets, the Australian and New Zealand currencies fell.
Related: Asian markets were mixed, as US job data gave the Fed room to raise interest rates.
The Australian dollar touched $0.6838, its lowest since July 19, while the Kiwi hit $0.61, its lowest since mid-July.
Bitcoin regained some ground but remained below $20,000 after falling over the weekend.
