Dollar Nears 13 1/2-year Peak, Lifted by Multiple Rate Hike View

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On Wednesday, the greenback traded within sight of a 13 1/2-year high, strengthened by strong U.S. housing data that added cemented expectations for a Federal Reserve rate hike in December and additional  tightening next year.

The dollar last stood at 100.98 compared to a basket of six major currencies. That increased from Tuesday’s low of 100.65 and which is not too far from Friday’s peak of 101.48 – the highest for the dollar index  since April 2003.

Data on Tuesday presented a U.S. home resales increase in October to their highest level in more than 9-1/2 years, helping to support the dollar.

Satoshi Okagawa, senior global market analyst for Sumitomo Mitsui Banking Corporation in Singapore stated, “Still, one factor that has blunted the dollar’s momentum this week is a pull-back in benchmark U.S. 10-year Treasury yields from their recent highs.”

“Bonds have settled down, and that’s a reason why dollar- buying hasn’t been so intense,” Okagawa added.

The U.S. 10-year Treasury yield  raised at 2.319% at Tuesday’s U.S. close, down from Friday’s one year peak  of 2.364%.

The dollar has increased largely over the past couple of weeks, lifted by expectations that the Trump administration would increase fiscal spending, in turn elevating inflation and lifting interest rates.

Compared to the yen, the dollar last changed hands at 111.07 yen . On Tuesday it had increased to as high as 111.36 yen, matching the Monday’s peak, which was the greenback’s strongest level against the yen since late May.

On Wednesday, trading in the yen is expected to be thinner than usual, with Japanese markets not open because of a public holiday.

The dollar’s increase to the approximately six month peak compared to the yen amounted to a increase of 10% from its Nov.9 trough near 101 yen.

The euro last raised at $1.0631,having set an approximately one-year low of $1.0569 the previous week.

Later on Wednesday, attention will turn to U.S. durable goods orders, along with the minutes of the Fed’s November policy meeting.

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