TOKYO- The dollar rose to its highest level in almost two months versus major peers on Thursday after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023, citing an improved health situation and dropping a long-standing reference that the crisis was weighing on the economy.
The dollar index, which tracks the currency against six rivals, ticked up to 91.459 in Asia, building on its nearly 1 percent surge overnight, the biggest gain since March of last year.
Only New Zealand’s kiwi made any meaningful headway against the dollar among major currencies on Thursday, climbing 0.4 percent after data showed New Zealand’s economy grew much faster than expected in the first quarter. The kiwi had tumbled more than 1 percent on Wednesday.
A majority of 11 Fed officials penciled in at least two quarter-point interest rate increases for 2023, even as officials in their statement pledged to keep policy supportive for now to encourage an ongoing jobs recovery.
The projections showed the outlook for inflation jumping this year, though the price increases were still described as “transitory.” Overall economic growth is expected to hit 7 percent.
“The Fed’s super hawkish pivot should reinforce the lows and offer further near-term USD support,” TD Securities analysts wrote in a research note.
“A double-whammy of higher rates and wobbly risk sentiment would result in positioning squeeze and the start of a new narrative,” possibly resulting in “a 2 percent broad USD rally through the summer months,” the note said. – Reuters
