The US dollar index on Friday reached a five-week high and was on track for its biggest weekly gain since April 2020 as investors adjusted for the likelihood that the US Federal Reserve would keep hiking rates to battle inflation.
The US central bank needs to keep raising borrowing costs to tame decades-high inflation, a string of US central bank officials said on Thursday, even as they debated how fast and how high to lift them.
“They still have their work cut out for them, and I don’t think the market was really positioned that way after the July FOMC [US Federal Open Market Committee],” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
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The New Taiwan dollar on Friday fell to its lowest point against the US dollar since June 2020, losing NT$0.029 to close at NT$30.020 against the greenback, down 0.17 percent from a week earlier.
The US dollar index rose 0.36 percent to 107.96, its highest since July 15, while the euro fell to 0.32 percent to US$1.0055, its lowest since the same date.
The US dollar gained 0.81 percent against the yen at ￥137, the strongest since July 27. The British pound tumbled 0.89 percent to US$1.1830 and was set for its biggest weekly drop against the dollar since September 2020.
The Fed is seen as having more room to hike rates than central banks of other large economies, which are more fragile. Fed funds futures traders are pricing in a 54 percent expectation that the Fed would hike rates by 50 basis points next month and a 46 percent probability of a 75 basis points increase.
Fed Chairman Jerome Powell is to update the market on his views at the annual Jackson Hole, Wyoming, symposium on Thursday through Saturday.
The US dollar has also benefited from safe haven demand, as weakening Chinese data and an energy crisis in Europe raise fears of further economic slowdown, said Jane Foley, head of foreign-exchange strategy at Rabobank in London.
The yuan slipped to its lowest since September 2020 at 6.8199 yuan per US dollar in onshore trading after the central bank set a much-weakened midpoint guidance, with traders expecting further downside.
In cryptocurrencies, bitcoin fell 7.3 percent to US$21,523, while ether was down 8.08 percent to US$1,699.
“Weakness has seeped into the crypto sphere as speculators retreated from highly risky assets,” Hargreaves Lansdown senior investment and markets analyst Susannah Streeter said.
Additional reporting by Staff writer, with CNA
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