Dollar Soars to Two-Week High Amid Bets of Rate Hike

The US dollar strengthened to a two-week high on Monday, driven by bets of a rate hike after Federal Reserve Chair Kevin Warsh's hawkish remarks. Warsh said that if policymakers don't get confidence that inflation is heading down to 2%, the central bank will have work to do.

Markets raised the implied probability of a September rate hike to 57% and yields on interest-rate-sensitive two-year US Treasury notes rose to a more than one-month high of 4.33%. OCBC's FX strategist Sim Moh Siong said that Warsh's defense of the inflation target has reduced a major drag on the US dollar.

The yen slipped past the closely watched 160-per-dollar level, with some expecting official intervention to support the currency. However, UBP's senior economist for Asia Carlos Casanova noted that historically, interventions have only held when fundamentals moved in the same direction.