Rae Wee
SINGAPORE (Reuters) – Dollar surges to 21 hit a one-year high against a basket of currencies on Monday after Federal Reserve Chairman Jerome Powell signaled that interest rates would stay higher for longer to reduce soaring inflation.
U.S. dollar index rises to two-decade high of 109.4 in early Asian trade, dollar strengthens Pushed other major currencies to new lows and put pressure on
USD took a hit 75. 36 in early Asian trade against the yen, the highest since July 20. Last increase of 0.36% to 59 ).485. The offshore yuan also fell to a two-year low of 6. 9321 against the US dollar.
Sterling fell to a 2-1/2 year low of $1. 485, last down 0.5% to $1. 16715, while the euro fell 0.36% to $0. 9929.
Powell warned Friday that households and businesses will face “some pain” as it takes time for the Fed to rein in inflation, a move that expanded The dollar’s rise.
“Powell made it clear that there is no dovish turn as some market participants expected,” Commonwealth Bank of Australia (OTC: CMWAY).
“I think this week’s ( U.S. dollar index ) will be priced in as market participants continue to price in a more aggressive tightening cycle from major central banks , tracking even higher to the 110 point.”
The market is now priced at around 33.5% chance75 based on Rate hike at the next Fed meeting in September.
Despite the odds of a rate hike at the European Central Bank’s September policy meeting, the euro has struggled amid increased investor focus on the energy crisis.
Russian state energy giant Gazprom (MCX: GAZP) is expected to stop natural gas from August to September 2, supply to Europe through its main pipeline for maintenance .
“Fears of a complete shutdown of Russian gas will keep EUR/USD heavy and below par,” said CBA’s Kong.
The risk-sensitive Australian and New Zealand dollars were also under pressure on fears that sharp global interest rate hikes would hamper economic growth.
Australian dollar down 0.59 % to $0.6853, while kiwi hit a one-month low of $0.6105 and last trade 0.% as low as $0. 6113.
