The US dollar had its biggest weekly gain in 10 months amid speculation that the Federal Reserve will signal after a meeting next week that it is moving closer to raising interest rates for the first time since 2006.
The US currency reached a six-year high against the yen after a research paper from the San Francisco Fed said investors may be underestimating the pace of rate increases. Treasury two-year note yields jumped, burnishing the appeal of dollar-denominated assets. The pound touched a 10-month low as Scotland prepared to vote on independence, and currency-market volatility rose to the highest since February.
“The markets have shifted to expecting a more hawkish Fed statement,” Daniel Katzive, head of foreign-exchange strategy for North America at BNP Paribas SA, said in New York. “That’s boosted US front-end yields, and that should be supporting the dollar versus the euro and yen.”
The Bloomberg Dollar Spot Index rose 1.2 percent, the most since the five days ended Nov. 1 last year, in New York this week. The gauge touched 1,051.77 yesterday, the highest since July last year.
The yen dropped for a fifth week, the longest stretch this year, losing 2.1 percent to ￥107.34 per dollar. It touched ￥107.39, the weakest since Sept. 22, 2008. The euro was little changed at US$1.2963, after falling for the previous eight weeks. It reached US$1.2860, a 14-month low, on Tuesday. The shared currency rose 2.2 percent to ￥139.15.
Sterling fell for a second week against the dollar and euro as opinion polls showed Scotland’s vote on whether to leave the UK is too close to call.
One-month implied volatility, a measure of future price swings, jumped to the highest in almost three years before the referendum on Thursday. A “yes” vote would mean a 5 percent to 10 percent slide by the pound against the dollar within a month, according to 61 percent of the 31 respondents surveyed by Bloomberg between Sept. 5 and Thursday.
The currency declined 0.4 percent to US$1.6268 and touched US$1.6052, the weakest since Nov. 15 last year. Sterling depreciated 0.5 percent to ￡0.7969 per euro.
The Brazilian real and Australian dollar were the biggest losers among the greenback’s 31 major peers this week. The real slid 4.2 percent, the most since August last year, after a poll showed increased support for Brazilian President Dilma Rousseff amid a recession and above-target inflation. The Aussie sank 3.6 percent, also the most in more than a year.
Russia’s ruble sank to a record 37.97 per dollar as the EU and US widened sanctions amid conflict in Ukraine with pro-Russia rebels.
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