Dollar Hits Two-Month High on Strong Manufacturing Data and Fed Expectations
The US dollar held near a two-month high on Thursday after stronger-than-expected manufacturing data raised concerns about inflation and supported expectations for higher interest rates.
A purchasing managers' index report showed increased growth in the US, with some markets interpreting this as evidence that the Federal Reserve will raise interest rates further. This has led to a strengthening of the dollar against other major currencies, including the euro, which fell to $1.1378 - its lowest level in two months.
Federal Reserve Governor Michael Barr said that rising inflation risks and a strong economy mean the Fed is likely to raise interest rates again. Markets took this as forward guidance, prompting traders to increase bets on another monetary policy tightening at next month's meeting.
The dollar index, which measures the US currency against a basket of major currencies, remained close to a two-month high at 101.1. Oil prices also rose by about 4% after the Iranian president vowed never to surrender, further heightening inflation risks.