Tom Westbrook

SINGAPORE (Reuters – Friday’s dollar break through the key levels of the euro, indicating that traders have priced in a year with aggressive U.S. rates hikes.

Jerome Powell, the Federal Reserve Chair, bets that there will at least five hikes this year. He left it open Wednesday for a faster rate increase than previous cycles and he did not rule out allowing rates to rise sooner.

It didn’t help that data showed the highest annual U.S. GDP in over four decades.

Overnight, the euro plunged 0.9% to $1.1131, an all-time low. The yen dropped 0.6%, while the Australian and New Zealand Dollars fell over 1%. [AUD/]

The dollar gained 1.7% against the Euro, 2.2% on the Antipodeans, and has risen above 97 since July 2020. The last time it was at 97.250.

Ray Attrill (National Australia Bank) stated, “So much to all those analysts racing to conclude that this dollar rally was over, following early-year divergence among (rising] U.S.interest rates and (falling) dollars,”

Also, on Thursday the greenback jumped against the yuan. Its best session since september. The softening of industrial profit growth in China supported the argument for monetary ease.

Futures on Fed Funds are pricing in up to five U.S. increases this year, with others forecasting six.

In early Asia trade movements were minimal, with the yen hovering around 115.40 dollars and the currency clinging to $0.7029. Dec’s lowest support for the Aussie is $0.6994.

New Zealand dollars were under pressure, and fell back to $0.6570 after a 15-month period.

Sterling dropped to $1.3360 overnight. It hovered around $1.3385 after traders turned their attention to the Bank of England meeting next Tuesday. The rate markets are pricing in a 90% likelihood of an increase.

Next week, the European Central Bank as well as the Reserve Bank of Australia will meet. Analysts see the dollar’s surge beginning to slow down as central banks and economies around the globe recover from the 2008 pandemic.

Dollar is at its cycle peak and can go higher as increased market volatility and rate differentials provide support. However, this is only the final stage,” stated Kit Juckes (OTC:), strategist at Societe Generale.

“As the global economic recovers from this year’s worst COVID pandemics, the market will focus on monetary policy normalisation. Growth outside the U.S. is likely to lead to the highest currency returns in this second half.

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Prices for currency bids at 0105 GMT

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

Previous changes

Session

Euro/Dollar

$1.1146 $1.1144 +0.01% -1.96% +1.1148 +1.1138

Dollar/Yen

115.4550 115.3600 -0.07% +0.22% +115.4650 +115.2750

Euro/Yen

128.67 128.55 +0.09% -1.25% +128.7100 +128.4700

Dollar/Swiss

0.9311 0.9310 +0.02% +2.08% +0.9316 +0.9309

Sterling/Dollar

1.3392 1.3380 +0.10% -0.96% +1.3394 +1.3381

Dollar/Canadian

1.2730 1.2740 -0.08% +0.68% +1.2748 +1.2728

Aussie/Dollar

0.7038 0.7034 +0.07% -3.17% +0.7040 +0.7028

NZ

Dollar/Dollar 0.6578 0.6582 -0.10% -3.94% +0.6588 +0.6570

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