Kong (Reuters) – The dollar rose to its highest level in almost two years on Wednesday, following overnight gains thanks to more hawkish comments from a member of the Federal Reserve. The euro lost ground because of the possibility of more Western sanctions against Russia, which hurt the dollar.
The dollar index, which compares the greenback with six rivals, climbed to 99.640 in early trading, its highest level since May 2020, before settling slightly lower.
The index rose 0.5 percent on Tuesday after a Fed official said that she expects interest rate rises and a quick runoff of the country’s balance sheet to bring monetary policy to a “more neutral posture” later this year, with more tightening if necessary, but that she doesn’t think there will be any more rate rises.
Generally, Brainard is seen as a more dovish policymaker.
“Brainard’s statements are directly responsible for the recent rebound in yields and the higher dollar,” said Ray Attrill, global head of foreign exchange strategy at the National Bank of Australia.
In the United States, the two-year yield has reached its highest level since January 2019, the five-year yield has reached its highest level since December 2018, and the benchmark 10-year yield has risen to 2.6144 percent, its highest level since March 2019.[US/]
“However, given the dollar’s weight in the index, it’s difficult to disentangle it from the euro-dollar exchange rate, and the euro has been harmed by the recent discussion of widening sanctions, which opens the door to negative news for the eurozone economy,“ Attrill noted.
The euro was trading at $1.0894, its lowest level in more than a month.
The European Union’s proposed penalties would prohibit the purchase of Russian coal and prohibit Russian ships from visiting EU ports, as part of a broadening of Western sanctions on Russia in response to its almost six-week-long invasion of Ukraine.
The dollar gained strength across the board. As of late, it was at 123.84, up 0.17 percent against the Japanese yen. It had just hit a week high in early trading and was going back toward March’s almost seven-year high of 125.1.
The Bank of Japan is attempting to keep Japanese rates low, and the growing yield differential between the United States and Japan is weighing on the yen.
Sterling traded at $1.30750, edging closer to last month’s low of $1.30, its lowest level since November 2020, while the Australian dollar held steady at $0.7574, close to Tuesday’s near 10-month high after the Reserve Bank of Australia’s hint that higher interest rates were on the way.
Bitcoin was somewhat weaker at around $45,300.
