By Alun John

HONG KONG (Reuters – On Wednesday, the dollar jumped to its highest level for nearly two years following more hawkish remarks from a Federal Reserve official overnight. The euro however was affected by new Western sanctions targeting Russia.

The greenback was measured against six peer currencies in the early trading session. It rose 0.15% to 99.620, its best level since May 2020.

After Fed Governor Lael Mindard announced Tuesday that the Fed expects to combine interest rate hikes with a fast balance sheet runoff to return U.S.monetary policy to a more neutral position in late this year. Additional tightening may follow as required.

Brainard is usually viewed as more cautious policy-maker.

Ray Attrill of National Bank of Australia’s global FX strategy, stated that the comments of Branard are responsible for the increase in yields and firmer dollar.

The U.S. 2 year yield has reached its maximum level since January 2019; the 5-year yield was at its peak since December 2018; the benchmark 10-year yield rose up to 2.612%, the highest yield since April 2019. [US/]

Attrill stated that “When we speak about the dollar it is difficult to dissociate it from the euros-dollar exchange rate” because of its weight in the index. He also said that the latest discussion about increasing sanctions had done little favors for the euro, which has opened up bad news about the economy of the eurozone.

On Wednesday, the euro fell to $1.0894, its lowest point in almost a month.

The European Union would prohibit Russian coal purchases and ban Russian ships entering EU ports. This is part of an increase in western sanctions against Russia following its six week invasion of Ukraine.

Russia denies targeting civilians at Bucha.

Dollar gains had broad base. It reached 123.94 at 0.27% against Japanese yen, its highest point in a week. The gains are reminiscent of March’s 125.1 record, which was nearly seven years ago.

Bank of Japan has been holding Japanese yields lower, and the increasing gap between U.S.-Japanese yields is adding weight to the yen.

Sterling stood at $1.30655, moving back towards last month’s lowest of $1.30 since November 2020. Meanwhile, the dollar was steady at $0.7578 near Tuesday’s nine-month high after the Reserve Bank of Australia warned of higher interest rates.

It was slightly lower around $45,000