The euro fell to $1.1358, its lowest level since July 28, as the dollar climbed to a two-month high on rising Treasury yields and mounting bets on further Federal Reserve rate hikes. The move came alongside hawkish comments from Fed officials and a resignation atop the European Central Bank.
The euro slipped 0.07% against the dollar to $1.1372 on Thursday, after falling as low as $1.1358. The move came as the dollar index rose 0.15% to 101.28, its fourth straight daily advance, after touching 101.39, the highest level since July 29.
Yields climb on hawkish Fed signals
Treasury yields kept climbing after sharp moves in the prior session. The 30-year bond yield hit its highest level since June 2004. The 10-year note reached its highest point in nearly two decades. Business activity data pointed to mounting price pressures, and weekly initial jobless claims dipped by 1,000 to 197,000, below the 201,000 estimate from economists polled by Reuters.
Since the Fed's 25-basis-point rate hike last week to the 3.75%-4.00% range, several officials have flagged the possibility of more increases if inflation does not moderate. New York Fed President John Williams and Philadelphia Fed President Anna Paulson both signaled more rate increases were likely needed. Discussing the run-up in bond yields, Joseph Trevisani, senior analyst at FXStreet, said: "I don't think FX traders need to know too much more than that."
Markets now price a 68.6% chance of at least a 25-basis-point hike at the Fed's October meeting, up from 55.4% a week ago, according to CME FedWatch. Oil prices added to inflation worries, rising almost 4% after a Houthi missile attack on Saudi Arabia revived supply-disruption fears, though gains eased on reports the US and Iran discussed reopening the Strait of Hormuz.
ECB leadership shake-up
The euro's slide also came alongside a change atop the ECB. Board member Isabel Schnabel resigned on Thursday to take a senior role at the International Monetary Fund, kicking off a lengthy reshuffle atop Europe's most powerful financial institution.
Other central banks moved in parallel. Norway's central bank raised interest rates on Thursday, and Sweden's signaled it was likely to follow suit before the end of the year, as policymakers worldwide confront rising inflation from a war-driven energy shock.
Source: Investing.com
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