SYDNEY- The dollar hit 2021 highs against sterling and the euro on Thursday, while the yen was smarting from its sharpest drubbing in a month, after the hottest US inflation reading in a generation fanned bets on rate hikes.
US consumer prices grew at their fastest annual pace since 1990 last month, data showed, and traders think the Federal Reserve could respond by lifting interest rates faster than peers in Europe and Japan.
The euro was pummelled, as the European Central Bank is seen lagging on policy tightening, and it slipped further to $1.1465 on Thursday, its lowest since July 2020. It is without major chart support until around $1.12.
Sterling was also marginally down at a fresh 11-month low on Thursday of $1.3393. The yen extended a sharp reversal of recent gains to 114.15 per dollar and the Australian and New Zealand dollars made one-month troughs.
“The market is still conferring a degree of credibility on the Fed, that they are not going to allow very high inflation to persist indefinitely,” said National Australia Bank’s head of FX strategy, Ray Attrill.
Even if other central banks are eyeing similar moves, a dollar index move above 95 might prompt investors to get out of the way of a rising greenback, he added.
“It’s quite a big level technically and if we can break up through that then there will be more people throwing in the towel.” The index ticked up to 95.002 on Thursday. – Reuters
