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LONDON (Reuters) – The dollar held close to a 14-month high against the euro on Thursday, as surging energy prices increased the risk of the US Federal Reserve taking action earlier to normalize its policy.
The US currency edged down to $ 1.1563 per euro after strengthening to $ 1.1529 on Wednesday for the first time since July of last year.
The dollar index, which measures the greenback against a basket of six other major currencies, was little changed at 94.153 after rising nearly 0.5% in the past two sessions. That brought it back to near the one-year high of 94.504 reached last week.
The Japanese yen, another safe haven, edged up to 111.29 per dollar, near the middle of its range for the past week and a half.
Overnight, crude oil hit a seven-year high before pausing after its recent sizzling gains, while natural gas hit a record high in Europe and coal prices from major exporters also hit. historic peaks.
The Federal Reserve, which has so far mainly argued that inflationary pressures will be transient, has said it will likely start cutting monthly bond purchases as early as November, before following up with interest rate hikes, which could occur as early as next year. .
Friday’s US non-farm payroll report could provide additional clues as to the timing of the Fed’s next moves. Economists expect continued improvement in the labor market, with a consensus forecast of 473,000 jobs created in September, according to a Reuters poll.
Later Thursday, investors will attend a host of speakers from the Federal Reserve and the European Central Bank. A joint conference on inflation dynamics will be hosted by the Cleveland Fed and the ECB. ECB policymaker Isabel Schnabel speaks at 2:00 p.m. GMT, while Loretta Mester of the Fed speaks at 4:45 p.m. GMT.
“The biggest risk to a stronger dollar index probably comes from any substantial reassessment of inflation risk by the European Central Bank,” ING strategists said in a note to clients.
A Reuters poll of FX strategists found that the majority expect the dollar to remain dominant in the near term before giving ground to its peers a year from now.
Elsewhere, nervousness around the U.S. debt ceiling – which had supported the dollar – eased somewhat after the Senate appeared close to a temporary deal to avoid a federal debt default within two weeks following.
Senate top Republican Mitch McConnell has proposed that his party allow an extension of the federal debt ceiling until December.
“This extension may alleviate some of the short-term upside risk facing the dollar, but it will take a more resolute deal than throwing the box down the road to eliminate the upside risk of the dollar,” the Commonwealth Bank of Australia strategists in a client note.
In the digital currency space, bitcoin, the world’s largest cryptocurrency by market value, hovered near a nearly five-month high of $ 55,800 hit on Wednesday, trading for the last times to about $ 54,686.
Reporting by Ritvik Carvalho; additional reporting by Kevin Buckland in Tokyo; Editing by Susan Fenton
