For the third day in a row, the US dollar is up short on US gains

Author: Saikat Chatterjee

LONDON (Reuters) – The dollar rose for the third day in a row on Friday after a shocking strong US inflation shocked markets and pushed investors to push the US rate hike until mid-2022.

As short-term U.S. Treasury yields rose – five-year bond yields rose to a high in February 2020 – investors were betting that U.S. policymakers would be forced to raise interest rates. [US/]

Against a basket of rivals, the 0.1% reached 95.27, the highest level since July 2020. The momentum that the green card has risen this week has broken above the two-month trading interval as analysts have announced more gains.

“We don’t think this is the end of the movement and we expect the US dollar to stay strong in the first half of 2022 as we enter the first half of 2022, when the Fed cuts will come to an end and the rate is close. Hike will offer dollar support this time,” Mizuho said strategist.

The resurgence of the dollar has given them a new lease of life in the markets of moribund volatility, as traders have made an effort to buy options to protect themselves against further dollar strength. The currency volatility index had a new 6-month high.

Wednesday’s data showed a broad rise in U.S. consumer prices last month at the fastest pace since 1990, with the Fed questioning whether price pressures would be “transient” and encouraging speculation that policy makers would raise interest rates sooner than expected. .

Markets now have a price to raise the first rate for July and a high probability of another for November. CME data assigns a 50% probability of a rate hike by then, compared to less than 30% a month earlier.

The euro fell to a 16-month low of $ 1.1436, and the sterling fell to $ 1.3354, the weakest level this year.

Investors have been increasingly reluctant to forecast a single currency, as the European Central Bank is unlikely to change its very appropriate policy settings in the short term, with the economy slowing backwards.

The risk-sensitive Australian dollar sank below $ 0.7277 for the first time in more than a month in cryptocurrency, with bitcoin trading at $ 65,000 south, down from a record $ 69,000 earlier this week.