Dollar Surges on Strong US Data and Rising Rate Hike Bets
The US dollar has reached a two-month high after strong US manufacturing activity data was released. The report showed higher-than-expected business growth, which is causing concerns about inflation and further interest rate hikes by the Federal Reserve.
According to Reuters, the weak auction of five-year Treasury notes also contributed to higher US Treasury yields, supporting the dollar. Yields on these notes rose above 5%, a level not seen since 2007.
The dollar index, which tracks the US currency against a basket of major currencies, held near 101.1, its highest level in two months. The euro fell to $1.1378, reaching its lowest level in two months, while the pound traded near a three-month low of $1.3231.
Federal Reserve official Michael Barr said the central bank would likely need to raise interest rates again, prompting traders to increase their bets on another hike in borrowing costs as early as October. Market participants estimate the probability of such a decision at nearly 70%.