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US Dollar
Source: Newsmaker.id
The US dollar held near seven-week highs during Thursday's trading (Sept. 17) after the Federal Reserve raised interest rates and signaled further tightening. The dollar index hovered around 100.3, nearing its strongest position since July 31. This strength pushed the euro down to US$1.1463, while the yen traded around 155.98 per dollar, close to a two-week low.
The Fed's decision to raise rates was unanimous, with officials projecting one additional hike this year. Commonwealth Bank of Australia currency strategist Carol Kong assessed that the statement from Fed Chair Kevin Warsh was more hawkish than anticipated, prompting the market to raise interest rate expectations. According to the CME FedWatch tool, the probability of an additional 25-basis-point hike before year-end stands at approximately 90%.
In the bond market, the Treasury yield curve flattened further. The two-year yield held around 4.7153%—its highest level of 2024—while the ten-year yield dipped slightly below 5%. However, DBS strategist Philip Wee remains unconvinced that the Fed's decision marks the start of a sustained dollar rally, noting that the US central bank is playing catch-up with other nations in addressing inflation risks.
Investor attention has now shifted to the Bank of England, expected to hold rates steady on Thursday, and the Bank of Japan, expected to raise rates to a 31-year high on Friday. Sterling remained relatively stable at US$1.3372 ahead of the BOE decision. Regarding the yen, the market will be watching for clues from BOJ Governor Kazuo Ueda concerning the timing and pace of future hikes, as a September increase has largely been priced in.
Meanwhile, the Australian dollar rose 0.35% to US$0.7111 after the International Monetary Fund stated that Australia might require further rate hikes to curb inflation. The New Zealand dollar also rose 0.2% to US$0.5725, indicating that the prospect of monetary tightening in other nations can still provide support for their respective currencies.
Newsmaker Analysis: The dollar remains underpinned by expectations of higher US interest rates, yet the sustainability of its appreciation hinges on the divergence of policy paths among central banks. A tighter-than-expected stance from the Bank of England (BOE) or the Bank of Japan (BOJ) could potentially curb the dollar's dominance. Conversely, decisions that align with expectations—absent any signals of further tightening—could sustain support for the US currency. Consequently, the market needs to closely monitor upcoming policy guidance to assess whether the dollar's rally has further room to run. (arl)
Source: Newsmaker.id