By Kevin Buckland
TOKYO (Reuters) – The dollar touched its lowest this week against major peers on Thursday, taking a breather from a rally that had lifted it to a one-year high powered by expectations for quicker Federal Reserve interest rate hikes.
The dollar index, which measures the currency against six rivals, was about flat at 94.016, after dropping 0.53% on Wednesday, the most since Aug. 23.
The index reached 94.563 on Tuesday, its highest since late September 2020, after surging nearly 3% since early last month.
The dollar pulled back even after minutes of the Federal Open Market Committee’s September meeting confirmed tapering of stimulus is all but certain to start this year, and showed a growing number of policymakers worried that high inflation could persist.
A Labor Department report showed U.S. consumer prices rose solidly in September, and they are likely to rise further amid a surge in energy prices, potentially pressuring the Fed to act sooner to normalise policy.
The U.S. 5-year, 5-year-forward breakeven inflation rate, one of the more closely followed gauges of long-term inflation expectations, surged to its highest level in seven years at 2.59% overnight.
Most Fed officials, including Chair Jerome Powell, have so far contended that price pressures will be transitory.
Money markets are currently pricing about 50/50 odds of a first 25 basis point rate hike by July.
“The USD’s reaction may be an example of ‘buy the rumour, sell the fact,'” Joseph Capurso, a strategist at Commonwealth Bank of Australia, wrote in a client note.
“We consider the FOMC’s assumption of a transitory spike in inflation is wrong. A more aggressive tightening cycle will support the USD in our view.”
The dollar edged 0.11% higher to 113.37 yen, but back from the three-year peak of 113.80 yen hit overnight.
The euro was mostly flat from Wednesday at $1.1599, but earlier touched $1.1601 for the first time since Oct. 5.
Sterling was little changed at $1.3665, holding Wednesday’s 0.55% advance and near its highest level this month.
Bitcoin edged higher to touch a five-month peak at $58,300.
(Reporting by Kevin Buckland; Editing by Muralikumar Anantharaman)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.