US Dollar Hits Two-Month Peak as Fed Rate-Hike Expectations Rise, Yen Slides
By Jiaxing Li
Dollar Strengthens Amid Fed Policy and Global Uncertainties
Fed Rate-Hike Expectations Drive Dollar Surge
HONG KONG, June 18 (Reuters) - The U.S. dollar clung to a more than two-month high on Thursday as markets ramped up wagers on Federal Reserve rate hikes this year, heaping fresh pressure on the Japanese yen toward intervention territory.
The U.S. central bank held rates steady in a 3.50%-3.75% range as new chair Kevin Warsh opened the new era with a sweeping policy review. Nearly half of policymakers, however, now expect a hike this year on mounting inflation concerns.
The Fed funds futures market has now priced in an 83% chance of Fed tightening in December, according to CME FedWatch, with a strong retail sales reading further adding to hawkish bets.
Geopolitical Tensions Support Dollar
Fresh Gulf uncertainties continued to sap risk appetite after U.S. President Donald Trump said he could resume attacks if Iran violates the ceasefire agreement, keeping oil prices elevated and the dollar supported. Iran's leaders did not address the new threats.
Currency Market Movements
Euro, Sterling, and Risk-Sensitive Currencies
The euro last traded a shade stronger at $1.1511 and sterling strengthened to $1.3318, after touching the currencies touched two-month lows earlier.
The risk-sensitive Australian dollar and the New Zealand dollar were both up roughly 0.2% to $0.7025 and $0.5780, respectively.
Dollar Index Performance
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was little changed at 100.31.
It surged 0.85% to the strongest level since March 31 in the previous session, in its biggest single-day gain since March 2,
Market Analyst Commentary
"The dollar is up making some sizable gains... this is going to take a little while to shrug off," NAB's senior markets strategist Gavin Friend said in a podcast. "It looks like we could be pushing into new territory here for the dollar."
Yen Weakness and Intervention Concerns
The Japanese yen weakened to as much as 160.760 after hitting its weakest since 2024 overnight, continuing to hover around the 160 level widely seen as a line in the sand for potential official intervention.
Other Central Bank Actions
Bank of England Policy Outlook
Elsewhere, the Bank of England looks on course to keep interest rates unchanged at 3.75% later on Thursday as it assesses what a tentative truce in the Iran war means for inflation.
(Reporting by Jiaxing Li; Editing by Jacqueline Wong)
