HONG KONG- The dollar edged up to its highest level in nearly two years on Wednesday after jumping overnight on more hawkish comments from a Federal Reserve official, while the euro was hurt by the prospect of new Western sanctions on Russia.
The dollar index, which measures the greenback against six peers, gained 0.15 percent in early trade to 99.620, its highest level since May 2020.
The index gained 0.5 percent on Tuesday after Fed Governor LaelBrainard said she expects a combination of interest rate increases and a rapid balance sheet runoff to bring US monetary policy to a “more neutral position” later this year, with further tightening to follow as needed.
Brainard is normally seen as a more dovish policy maker.
“Brainard’s comments are the proximate cause of the back up in yields and the firmer dollar that we’ve got,” said Ray Attrill, global head of FX strategy at National Bank of Australia.
The US 2-year yield is at its highest level since January 2019, the 5-year yield its highest since December 2018, and the benchmark 10-year yield rose to 2.6120 percent, its highest since April 2019.
“But when we talk about the dollar, it’s difficult to divorce it from the euro-dollar exchange rate, given its weight in the index, and the euro has been done no favors by the latest talk about broadening sanctions, which is opening up bad news for the eurozone economy,” Attrill added. – Reuters
