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Dollar climbs as Fed officials suggest more rate hikes to come

08/03/2022 | 09:39pm EDT
FILE PHOTO: Pound and U.S. dollar banknotes are seen in this illustration

HONG KONG (Reuters) - The dollar was on the front foot on Thursday, helped by several U.S. Federal Reserve officials pushing back against suggestions they will slow the pace of interest rate hikes, while the pound was flat ahead of a Bank of England meeting.

The dollar index, which measures the greenback against six peers, was steady in early trade at 106.39 having eked out small gains overnight. It is up around 0.5% this week, reversing the trend of the previous two weeks.

"The dollar weakened last week after the (policy setting) Federal Open Market Committee meeting because the market wanted to believe that the Fed was pivoting in a dovish manner because of slowing growth," said Sim Moh Siong, currency strategist at Bank of Singapore.

"This week, there are a lot more FOMC speakers pushing back against this idea, all singing the same tune: 'we are not done, and you should expect more rate hikes'," he added .

San Francisco Fed President Mary Daly and Minneapolis Fed President Neel Kashkari overnight voiced their determination to rein in high inflation, reiterating similar messages from other officials the day before.

A Reuters poll of analysts earlier this week found 70% thought the dollar was yet to peak in this cycle, even after the dollar index hit a two-decade peak in July.

According to CME's FedWatch tool, the market is pricing in a 58% chance of a 50 basis point rate hike at the Fed's September meeting, and a 42% chance of a another massive 75 basis point increase.

However Sim said the dollar's recent performance was a mixed picture as the improved risk sentiment, which has also helped equity prices in the U.S. has been supporting risk friendlier currencies.

The Australian dollar was at $0.695 on Thursday morning after gaining 0.46% the day before, trying to head back above the symbolic $0.7 level it fell from earlier in the week after seemingly dovish remarks from the central bank.

Also in central bank news, Sterling was little changed at $1.2158 ahead of a BOE meeting later in the day at which most investors expect the central bank will raise rate by 50 basis points to 1.75%, the highest level since late 2008.

The decision is due at 1100 GMT.

The euro was flat at $1.01635 and the Japanese yen, which has borne the brunt of this week's dollar gains, recovered a little to 133.54 per dollar.

Bitcoin was up a touch at $23,000.

(Reporting by Alun John; Editing bt Sam Holmes)

By Alun John

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) 0.25% 0.57475 Delayed Quote.8.60%
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) 0.07% 0.88545 Delayed Quote.-2.90%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.28% 0.65503 Delayed Quote.3.70%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) 0.32% 93.002 Delayed Quote.12.46%
AUSTRALIAN DOLLAR / NEW ZEALAND DOLLAR (AUD/NZD) -0.12% 1.14262 Delayed Quote.6.83%
AUSTRALIAN DOLLAR / SWISS FRANC (AUD/CHF) 0.20% 0.63304 Delayed Quote.-4.16%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.34% 0.6426 Delayed Quote.-10.41%
BITCOIN (BTC/EUR) -0.54% 19714.2 End-of-day quote.-53.10%
BITCOIN (BTC/USD) -0.57% 19314 End-of-day quote.-59.54%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) -0.25% 1.73831 Delayed Quote.-7.90%
BRITISH POUND / EURO (GBP/EUR) 0.07% 1.13889 Delayed Quote.-4.52%
BRITISH POUND / US DOLLAR (GBP/USD) 0.09% 1.11709 Delayed Quote.-17.43%
CANADIAN DOLLAR / AUSTRALIAN DOLLAR (CAD/AUD) -0.07% 1.129318 Delayed Quote.2.97%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) 0.27% 0.649633 Delayed Quote.11.93%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.30% 0.740072 Delayed Quote.6.84%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.38% 0.72552 Delayed Quote.-7.61%
DOW JONES FXCM DOLLAR INDEX 0.17% 13406.75 Real-time Quote.10.24%
EURO / AUSTRALIAN DOLLAR (EUR/AUD) -0.26% 1.52595 Delayed Quote.-3.52%
EURO / BRITISH POUND (EUR/GBP) -0.06% 0.8777 Delayed Quote.4.68%
EURO / US DOLLAR (EUR/USD) 0.04% 0.98056 Delayed Quote.-13.80%
INDIAN RUPEE / AUSTRALIAN DOLLAR (INR/AUD) -0.07% 0.019152 Delayed Quote.2.01%
INDIAN RUPEE / BRITISH POUND (INR/GBP) -0.05% 0.010995 Delayed Quote.11.22%
INDIAN RUPEE / EURO (INR/EUR) 0.18% 0.012519 Delayed Quote.5.97%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.04% 0.01227 Delayed Quote.-8.60%
MSCI SINGAPORE (GDTR) 1.29% 5346.57 Real-time Quote.-14.84%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.48% 0.56228 Delayed Quote.-16.03%
US DOLLAR / AUSTRALIAN DOLLAR (USD/AUD) -0.32% 1.556202 Delayed Quote.11.52%
US DOLLAR / BRITISH POUND (USD/GBP) -0.08% 0.895199 Delayed Quote.21.12%
US DOLLAR / EURO (USD/EUR) -0.04% 1.019825 Delayed Quote.15.68%
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