He dollar trades this Thursday at seven-week highs amid efforts by US President Joe Biden and Republican Congressman Kevin McCarthy to avoid a debt defaultwhile investors lowered expectations of relief from the Federal Reserve.
Biden and McCarthy on Wednesday underscored their determination to reach an agreement soon to raise the government’s $31.4 trillion debt ceiling, after agreeing a day earlier to negotiate directly after a months-long deadlock.
“In the short term, the debt ceiling is beneficial for the dollar,” said Viraj Patel of Vanda Research. “If the situation worsens, there will be a hard landing globally and you will have to buy dollars. If it is resolved, people will change their expectations for the Fed and we could see another hike.”
Traders see close to a 20% chance that the Fed will raise interest rates at its June meeting. About a month ago, the markets pegged the probability of a cut at 20%.
The dollar index rose 0.3% to 103.17 units, its highest level since March 27. In its last quote it operated at 103.10.
How the rest of the currencies work
The euro was down 0.3% at $1.0805, its highest level in six weeks, while sterling was just above Wednesday’s three-week low of $1.2422.
For its part, the dollar reached five-month highs at 137.935 yen, after six consecutive sessions on the rise, the longest streak since October.
The yuan touched its minimum against the dollar since December, after surpassing the key level of 7 per dollar for the first time in five months the day before, amid geopolitical tensions and new signs that China’s recovery from the economic and financial crisis is losing steam.
Source: Ambito
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