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By Kevin Buckland
TOKYO (Reuters) – The US dollar was nearing a 17-month high on Monday against major peers after Federal Reserve officials announced the first pandemic-era interest rate hike before March.
The euro sank against the British pound after the Netherlands entered the blockade on Sunday and the UK health minister did not rule out further cuts before Christmas as a result of the rapid spread of the Omicron coronavirus variant.
Although the cuts in COVID-19 blur economic growth forecasts, they are likely to keep inflation high and central banks more troubled.
Fed Governor Chris Waller, a well-known hawk, said on Friday that he believed the rate hike in March would be “very likely” and that the central bank could begin to reduce its balance sheet by mid-2022. Meanwhile, former pigeon Mary Daly, president of the San Francisco Fed, has refused to rule out a March hike and has come out in favor of a three-year hike next year.
The Fed’s rapid downturn, coupled with Omicron’s alarming spread, exacerbated the risk-free mood, which led investors to withdraw their capital from safe havens, including the Treasury and the dollar, with moves that boosted year-end profit taking, said Ken Cheug, chief. Asian foreign exchange strategist at Mizuho Bank.
The currency, which measures against six major counterparts, stood at 96,629, not far from last month’s 96,938 peak, the highest since July 2020.
The greenback hit its highest level since December 15 against the euro, sterling and risk-sensitive Australian dollar, although it slipped against the yen’s paradise currency, but remained close to the middle of the last three weeks of trading.
Ten-year U.S. Treasury yields, with which dollar-yen pairs are often closely linked, fell short of a two-week low on Friday.
Money markets are priced at a 50-50 quarter-point rise in March.
Chris Weston, head of research at Pepperstone Brokerage in Melbourne, warned that despite the wind of an increasingly windy Fed, the dollar could be vulnerable to a retraction.
“The location has been skewed in the USD for a long time, so it’s a great opportunity to square the position at the end of the year,” Weston wrote in a customer note. “While the actions of the central bank are a real problem, Omicron’s head office could be seen as a smoker gun to square the position.”
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Currency supply prices at 0530 GMT
Description RIC Latest US Close Pct Switch YTD Pct High Bid Low Bid
Previous Change
Session
Euro dollar
$ 1.1250 $ 1.1236 + 0.14% – 7.91% + 1.1255 + 1.1235
Dollar / Yen
113.4600 113.7400 – 0.19% + 9.90% +113.7000 +113.4800
Euro / Yen
127.64 127.77 – 0.10% + 0.57% +127.8200 +127.5300
Dollar / Switzerland
0.9234 0.9241 – 0.07% + 4.38% + 0.9244 + 0.9234
Pound sterling / dollar
1.3225 1.3233 – 0.05% – 3.19% +1.3243 +1.3223
Dollar / Canadian
1.2902 1.2894 + 0.05% + 1.31% +1.2905 + 1.2886
Aussie / Dollar
0.7109 0.7127 – 0.25% – 7.59% +0.7134 +0.7105
NZ
Dollar / Dollar 0.6722 0.6737 – 0.22% – 6.39% +0.6750 +0.6722
All places
Places in Tokyo
European spots
Volatility
Information on the Tokyo Forex Market from BOJ
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