Tom Westbrook

SINGAPORE, (Reuters) – The dollar started the fourth quarter at its highest level of the year. It then headed for its strongest week since June. Currency markets were anticipating that U.S. rates will rise ahead of those of other major currencies.

Early Friday saw the euro fall 0.1% to $1.1572. It then fell 1.3% this week to reach its lowest levels since July 2020, after crashing through key support at $1.16.

For the week the yen has fallen 0.6%, and doubled in the past fortnight. This is because of higher U.S. Treasury Yields which have driven flows out from Japan into dollars. U.S. Treasury Yields are rising due to market expectation of U.S. rates increasing in 2022 and tapering before year end. [US/]

On Thursday, the yen recovered from its 19 month low of 112.08 per dollar. Yields settled and traded at 111.41 dollars. It was at 94.327. This is the highest weekly gain since June.

Last week’s Federal Reserve meeting reinforced the expectation that asset purchases will taper in this year, and rates rises in 2022 or 2023.

Kit Juckes, strategist at Societe Generale (OTC) said that “as long as the markets are confident that the U.S. will start tightening its monetary policy within an acceptable timeframe,” the dollar should be well supported. He predicted that eventually the dollar would rise by 5-10% over current levels.

He stated that the European Central Bank could keep rates at zero, while Fed increases should maintain euro/dollar within the post-2014 range with a center of gravity of $1.12-1.16.

On Thursday, commodity currencies jumped on the dollar following a Bloomberg report that China ordered its energy companies to ensure winter supplies at all cost. The Bloomberg report cited unnamed sources familiar with the matter.

Beijing has been scrambling for more coal supplies to utility companies to restore power amid the uncertainty in markets caused by the possible hit to economic growth.

While the Australian dollar gained 0.7% overnight it wasn’t enough to make up for the drop in iron ore prices which fell by more than 1% during the quarter. It slumped by 3.6% during the third quarter, the worst performance against any G10 currency.

The Aussie dropped to $0.7222 earlier this week after hitting a low of one month. New Zealand’s dollar rose from its month-low of $0.6892 on Thursday to reach $0.6892. [AUD/]

Next week will see central banks from both countries meeting. The Reserve Bank of New Zealand is expected to raise rates.

Sterling also fell 2.5% last quarter and appears set for its worst week since January. This is due to concerns about the central bank’s hawkish tone despite growing supply chain issues. [GBP/]

Sterling was trading at just $1.34455, just below its 9-month lowest,

Friday will see markets in China and Hong Kong close. Later that day traders will be awaiting U.S. core consumption and personal spending data. They also anxiously watch for developments in the U.S. debate to raise the debt ceiling.

In mid-October, the deadline for additional Treasury borrowing is set.

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Prices for currency bids at 0134 GMT

Description U.S. Close RIC Pct Change Pct High Low Bid

Previous changes

Session

Euro/Dollar

$1.1571 $1.1578-0.06%-5.30%+1.1583+1.1564

Dollar/Yen

11.1.2700 111.3550. -0.07% +7.73%+1111.4800 +111.2750

Euro/Yen

128.76 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.82 128.62 128.6700

Dollar/Swiss

0.9321 0.9317 +0.05% -5.36% +0.9333 -0.9314

Sterling/Dollar

1.3452 1.3477 1.352% -0.17% +1.52% +1.3480

Dollar/Canadian

1.2702 1.2685 +0.13%.-0.25%. +1.2712, +1.2678

Aussie/Dollar

0.7223 0.7227 0.0.03% -6.9% +0.7240 +0.7221

NZ

Dollar/Dollar 0.6891 0.6897 -0.09% -4.04% +0.6904 +0.6890

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