Dollar Hits Two-Week High as Inflation Fears Reignite
The US dollar continued its upward trend on Wednesday, reaching a two-week high as investors sought safe-haven assets amidst rising inflation fears. Treasury yields and expectations of a September Federal Reserve rate hike contributed to the dollar's gains.
Meanwhile, the New Zealand dollar (NZD) tumbled even after the Reserve Bank of New Zealand (RBNZ) raised its policy rate by 25 basis points to 2.75%, as its outlook for further tightening was seen as less hawkish than expected. ANZ analysts said the policy track did not point to another increase in October, leading to a decline in wholesale rates and the NZD.
The kiwi fell to its lowest since August 13, with its pair against the US dollar (USD/NZD) rising 0.9% to 0.5843. The Australian dollar's (AUD) pair against the USD rose marginally to 1.4006, while the yen hovered above 160 as BOJ Governor Kazuo Ueda signaled a rate increase debate at the September meeting.
Global bond markets remain under pressure, with the 10-year US Treasury yield rising to 4.81%, its highest since late 2023. Rising energy prices and government spending are driving inflation worries, which were exacerbated by fresh strikes on Iran and Tehran's retaliatory measures.