Dollar Stays Near Two-Week High as Warsh's Comments Boost Rate Hike Bets
The US dollar held steady near its two-week high on Monday after Federal Reserve Chair Kevin Warsh's hawkish comments, which boosted bets of a rate hike in September.
Markets now expect a 57% chance of a rate increase next month, up from earlier predictions. This surge in expectations has driven the implied probability of a move to 57%, with yields on interest-rate-sensitive two-year US Treasury notes rising to 4.33%, their highest level in over a month.
Warsh's comments were seen as a clear indication that further tightening may be needed to curb price pressure, which has been a major concern for the Fed. OCBC's FX strategist Sim Moh Siong said Warsh's defense of the inflation target had reduced a major drag on the US dollar and shifted the focus back to economic fundamentals.
The euro edged up 0.1% to $1.1591, while sterling remained little changed at $1.3539. The yen slipped past the closely watched 160-per-dollar level, with the dollar's renewed strength putting pressure on the Japanese currency.