Dollar Hits Two-Month High on Hawkish Fed Rhetoric

The US dollar has reached its highest level in nearly two months after a sharp rally fueled by expectations of additional Federal Reserve interest rate hikes. The strengthening dollar was also influenced by strong economic data and a hawkish shift in Fed rhetoric.

The Swiss National Bank (SNB) left interest rates unchanged, but its willingness to intervene in the foreign exchange market tempered its tone slightly after the Swiss Franc weakened in recent months.

The Norwegian crown rose after the central bank raised its policy interest rate by 25 basis points to 4.50%, with economists arguing that Norges Bank remains the most hawkish in advanced economies.

Citi economist Giada Giani noted that while other central banks are concerned about rising energy prices, Norges Bank's focus is on domestic price pressures and inflation having been stuck above target for several quarters.

Forex experts also weighed in on the dollar's strength, with Capital Economics' Jack Allen-Reynolds stating that forex intervention would be the first tool out of the toolkit to address a stronger franc.