Dollar hits 2-1/2-month peak as US rates approach election

Fed’s Moderate Interest Rate Cut Strengthens Dollar

US Treasury yields rise on positive economic data

Trump election prospects impact market expectations

NEW YORK – The U.S. dollar climbed to a new 2-1/2-month high on Tuesday, extending recent gains on expectations the Federal Reserve will ease its interest rate cuts as investors brace for an apparently tense U.S. presidential election. .

The US dollar rose for three straight weeks and is on track for its 15th gain in 17 sessions as a series of positive economic data lowered expectations for the size and speed of the Federal Reserve’s rate cuts, sending US Treasury yields higher. The yield on the benchmark 10-year U.S. Treasury note hit 4.222% on Tuesday, its highest since July 26. The central bank is keeping rates stable, according to CME’s FedWatch Tool. A month ago, the market fully expected a decline of at least 25 bps. with a 50.4% probability of a decline of 50 bps.

“If the data weren’t strong in the US and certainly weren’t strong relative to the rest of the world, there wouldn’t be this divergence between what the Fed is moving towards and what other central banks are moving towards, which are opposite directions. at least tonally and rhetorically, and that is what is driving the dollar higher,” said Thierry Wiseman, global FX and rates strategist at Macquarie in New York.

The dollar index, which measures the greenback against a basket of currencies including the yen and euro, rose 0.12% to 104.08 after hitting 104.10, its highest level since Aug. 2. The index rose about 3.3% from the previous month. this is the strongest month since April 2022.

Sterling fell 0.04% to $1.2979.

The upcoming U.S. presidential election also continues to drive currency movements as market expectations for a victory by Republican presidential candidate and former President Donald Trump have risen in recent days, likely leading to inflationary policies such as tariffs.

“As Trump’s chances of winning the election have improved, the market is starting to price in rising inflation in the U.S. as well, because his major policy agenda is associated with more inflation, at least more than you would associate with Harris’ major policy agenda. “,” Wiseman said.

The euro fell 0.15% to $1.0798. A host of European Central Bank policymakers warned on Tuesday of the risk of inflation falling below the central bank’s 2% target, signaling a change in their focus after years of excessive price rises.

Against the Japanese yen, the dollar strengthened 0.17% to 151.08 after rising to 151.19, its highest level since July 31. The Bank of Japan is carefully considering growth risks associated with rising import prices as the yen weakens, Chief Executive Takeshi Kato said, Jiji Press reported on Tuesday. Japan is set to hold general elections on October 27. Several recent opinion polls have suggested the possibility of the ruling coalition losing its majority in parliament, which could cost Prime Minister Shigeru Ishiba his job or force his Liberal Democratic Party to seek an additional candidate. The coalition partner will remain in power, raising concerns that the Bank of Japan could face difficulties as it tries to slowly wean the country off decades of monetary stimulus.

In cryptocurrencies, Bitcoin lost 0.49% to $67,392.55.

This article was created from an automated news agency feed without modifications to the text.