Dollar reigns as hawkish Fed stands out among central banks
TOKYO : The U.S. dollar traded at its highest in over a year
to the euro and near a five-year high against the yen as a hawkish tilt by
Federal Reserve policymakers, buoyed by strong U.S. data, contrasted to more
dovish monetary outlooks in Europe and Japan.
The dollar index, which measures the greenback against six
major peers, eased slightly to 96.759, but still hovered close to Wednesday's
high of 96.938, the strongest level since July 2020.
Various Fed policymakers said they would be open to speeding
up the taper of their bond-buying programme if high inflation held, and move
more quickly to raise interest rates, minutes of the central bank's Nov. 2-3
policy meeting showed on Wednesday.
San Francisco Federal Reserve Bank President Mary Daly also
said in an interview with Yahoo Finance on Wednesday that she could see a case
being made to speed up the Fed's tapering of its bond purchases.
Meanwhile, readings on the labour market and consumer
spending outstripped economists' estimates, while inflation continued to heat
up.
"The U.S. economy retained its titanium status,"
buoying the dollar, Tapas Strickland, a director of economics at National
Australia Bank, wrote in a note to clients.
"Slightly hawkish comments from the normally dovish
Daly was also a factor."
The dollar was little changed at 115.355 yen, holding close
to the overnight high of 115.525, a level not seen since January 2017.
The euro edged higher to US$1.1210, but still traded within
sight of the near 17-month low hit on Wednesday at US$1.1186 after German
business confidence slumped for a fifth straight month.
While the U.S. calendar is mostly empty on Thursday due to
the Thanksgiving holiday, minutes from the European Central Bank's Oct. 28
meeting are due for release.
In a news conference after the monetary authority left
policy unchanged at that meeting, ECB president Christine Lagarde said
officials had discussed "inflation, inflation, inflation," but after
"a lot of soul-searching" had stuck to the view that inflationary
forces will prove transitory.
Lagarde gives a speech at an ECB legal conference later on
Thursday, at which board members Frank Elderson and Edouard Fernandez-Bollo
will also participate.
Sterling rose 0.12per cent to US$1.3342 after dipping as low
as US$1.3317 on Wednesday for the first time in 11 months.
Investors remained focused on whether or not the Bank of
England will raise interest rates on Dec. 16.
The BOE wrong-footed many investors when it did not lift
rates from record lows of 0.1per cent at the start of the month, following
comments from its governor Andrew Bailey in October that policymakers
"will have to act" to head off inflation.
Bailey speaks at Cambridge University later on Thursday.
Elsewhere, the risk-sensitive Australian dollar rose 0.17per
cent to US$0.7208, lifting off Wednesday's US$0.7185, its lowest level since
September.
The New Zealand dollar gained 0.25per cent to US$0.68895,
stabilising after a slide to a three-month low of US$0.6856 the previous day,
when the country's Reserve Bank raised the key rate by a quarter of a
percentage point to 0.75per cent, disappointing bulls hoping for a half point
increase.
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