The dollar hit a two-week high on Wednesday as investors turned to the U.S. currency amid growing concerns about the economic impact of the energy shock and weighed diverging monetary policy paths across major economies.
Iran and its Arab neighbours were plunged back into war on Wednesday by the biggest exchange of fire between Tehran and Washington since July.
The greenback tends to benefit from higher oil prices because the U.S. economy is less exposed to energy shocks than many other major economies, attracting demand at the expense of currencies such as the euro and yen.
While most economists expect the European Central Bank to be near the end of its tightening cycle after next week’s widely anticipated rate hike, the Federal Reserve is confronting a growing risk of having to tighten policy in 2027. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.20% to 99.865, its highest point since August 17. The euro was down 0.16% at $1.1575, after hitting $1.1566, its lowest since August 20.
The yield on the benchmark U.S. 10-year note rose to as high as 4.8182%, its firmest since November 2023. [US/] Japan’s benchmark 10-year yield extended its rally to 3.01% on Wednesday after reaching a three-decade milestone of 3% on Tuesday.
Markets are now pricing in a 68% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group’s FedWatch tool.
Yahoo Finance
