The dollar hit a seven-week high on Wednesdaybuoyed by optimism that a deal would be reached to avoid a US default, and as traders reduced bets on a Federal Reserve rate cut after strong consumer and housing data.
The dollar index, which compares the greenback with a basket of six currencies, rose to 103.12 units, its highest since the end of March. In its last operations it gained 0.3%, to 102.85 units.
The euro hit a six-week low at $1.0811 and later fell 0.2% to $1.0838.
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Helen Given, currency broker at Monex USA in Washington, said that “there are several factors that are driving the dollar forward”: “Advances in debt ceiling negotiations, stronger-than-expected US economic data and hawkish comments from some Fed officials are providing some strength.”
President Joe Biden and Republican Congressman Kevin McCarthy on Wednesday underscored their determination to reach an agreement soon to raise the federal government’s debt ceiling to $31.4 trillion and avoid an economically catastrophic default.
After months of stagnation, the leaders agreed to directly negotiate a settlement. A deal needs to be passed by both houses of Congress before the federal government runs out of money to pay the bills as early as June 1.
“The debt ceiling talks seem to be helping the dollar, regardless of how they appear to be going,” said Joe Manimbo, a senior market analyst at Convera in Washington, adding: “On the one hand, continued stagnation tends to give a safe haven boost to the dollar. On the other hand, any positive tone in the negotiations can increase the popularity of the dollar.”
The US currency gained 0.9% against its Japanese counterpart to 137.59 yen, after hitting a two-week high of 137.625.
Source: Ambito
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