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Forex - Dollar hits 14-year highs on Fed hike, Trump bets
Published Nov 16, 2016 07:15
Updated Nov 16, 2016 07:27
© Reuters. Dollar index hits highest level since April 2003 on Fed hike, Trump bets
Investing.com - The dollar rose to 14-year highs against a basket of the other major currencies on Wednesday, spurred higher by expectations for a U.S. rate hike and increased fiscal spending once Donald Trump becomes president.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, hit highs of 100.54, a level not seen since April 2003.
The dollar has been boosted by expectations that the Federal Reserve is on track to raise interest rates next month.
Better-than-expected U.S. retail sales data on Tuesday strengthened the case for a rate hike.
Investors are currently pricing a 90.6% chance of a rate hike at the Fed's December meeting; according to federal funds futures tracked Investing.com's Fed Rate Monitor Tool.
Expectations for higher rates typically boost the dollar by making it more attractive to yield seeking investors.
Many investors also believe that Trump's campaign pledges to increase fiscal spending, cut taxes and loosen financial regulation will lead to a pickup in economic growth and inflation.
Faster growth and inflation would also prompt the Fed to tighten monetary policy a faster rate than had previously been expected.
The dollar hit fresh five-month highs against the yen, with USD/JPY rising 0.43% to 109.66.
The euro fell to the lowest level since December 2015, with EUR/USD down 0.3% to 1.0692.
The pound was also weaker, with GBP/USD falling 0.27% to 1.2421.
In the U.K., data earlier on Wednesday showed that while the U.K. unemployment rate fell in the three months to September the labor market could be heading towards a slowdown.
Emerging-market currencies were hard hit, with the Mexican peso not far from record lows against the greenback, with USD/MXN at 20.48.
The Turkish lira fell to fresh record lows, with USD/TRY hitting 3.31, while the Russian ruble hit lows of 65.45.
Meanwhile, China’s yuan continued to slide, hitting its lowest level since December 2008.
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