Hideyuki Sao

TOKYO (Reuters – Commodity currencies reached multi-month peak on Thursday thanks to high raw material prices. The improved risk mood led the U.S. Dollar to lose momentum that was built on expectations of a tightening Federal Reserve monetary policy.

Sterling also enjoyed a strong showing due to firming expectations that the Bank of England will increase interest rates next month in an effort to reduce inflation. This was despite softer-than-expected UK data on Wednesday.

Yukio Ishizuki (senior strategist, Daiwa Securities) stated, “It seems almost certain that BoE will hike interest rates November, possibly again in December as there is a risk of inflation getting out of control due to a severe labor shortage.”

Globally, we expect to see rate increases to reduce inflation in many countries. This means that the U.S. Dollar is less prominent than ever in terms rate hike expectations.

The dollar index fell 0.3% in the week so far, to 93.602, which is near its lowest level since late September.

The commodity currencies, which were impacted by the high oil prices that reached new heights in recent years, led dollar gains.

C$1.2308 was the Canadian dollar’s highest level in four months. On Wednesday it traded at C$1.2325, due to Canadian inflation data.

Also, the bull run of the Australian dollar was extended to reach a three-1/2 month high of $0.75225. The New Zealand dollar reached a peak of $0.7208 after a four-month period.

British pounds stood at $1.3828. This was just below its Tuesday high of $1.3834. Its highest level for over a month.

Sterling was close to its highs since February 2020 at 84.26pence per euro.

Due to the rising expectation of a BoE rate rise, UK currencies held onto their momentum.

British overnight indexed Swaps offer a roughly 80% probability of an increase in the rate to 0.25% on Nov. 4.

The euro remained steady at $1.1652, a close match to Tuesday’s peak of $1.1670.

Positive risk sentiment weighed heavily on the Japanese currency, which is often regarded as a safe-haven.

At 114.39yen the dollar stood, just shy of Wednesday’s 4-year record high at 114.695yen.

As rising oil prices increase its import bill, the expectations for a wider trade deficit are dampening the yen. However, it is expected that China’s car exports will be affected by a lack of chips.

The record-breaking high for bitcoin was $67,016, almost 70% higher than the low a month before.

Ether reached $4,126 and is now close to its May record of $4,380.