US Dollar Holds Near 13-Month Highs as Rate-Hike Bets Strengthen
By Aboki Forex —
The US dollar continued its strong rally on Thursday, heading for its best monthly performance in nearly a year. Investors are betting that resilient US economic growth will keep interest rates elevated.
The greenback has surged against major currencies. This is driven by widening interest rate differentials, stronger Treasury yields, and expectations that the Federal Reserve could raise rates again before the end of the year.
Markets are now waiting for key US inflation data. That data could give more direction on monetary policy.
The dollar strengthened significantly against the euro this week. It broke below key levels and reached its strongest point in months before easing slightly to around current levels during Asian trading.
The dollar index, which tracks the currency against six major peers, climbed to its highest level in 13 months on Wednesday. It traded around that level on Thursday.
Against the Japanese yen, the dollar rose, leaving the yen near its weakest level in over a year.
Investors have sharply changed their interest rate expectations after the Federal Reserve's latest policy meeting. Before the US-Iran conflict, markets expected the Fed to start cutting rates later this year. Now, traders are pricing in the possibility of a rate hike after hawkish signals from Fed officials.
The dollar's rally has been reinforced by widening interest rate differences between the US and other major economies. US Treasury yields have also risen, attracting more investors to the dollar.