Dollar rises as Fed signals rate hikes in 2023
The dollar climbed during early trade in Europe on Thursday. The rise was seen on higher levels unachieved for around two months following the Federal Reserve’s surprised markets with a hawkish turn, bringing forward its timetable for raising interest rates to 2023.
The Dollar Index, which tracks the greenback against a basket of six other currencies, gained 0.2% at 91.418, after surging nearly 1% overnight, its biggest climb since March of last year.
USD/JPY added 0.1% at 110.75, just off its recent high of 110.83, a level not seen since April 1; EUR/USD dropped 0.1% to 1.1986, after falling over 1% overnight, its biggest drop since April 2020; GBP/USD was flat at 1.3987, just above its lowest level since May 7; and the risk-sensitive AUD/USD gained 0.1% at 0.7617, recovering to a degree after earlier falling to 0.7598, the lowest since April 13.
The U.S. Federal Reserve ended its recent two-day policy meeting on Wednesday and handed down the expected policy stance of maintaining the current levels of interest rates and monthly bond purchases.
However, the Fed surprised investors when new projections saw 11 of 18 central bank policymakers plan for two interest rate increases of 25 basis points in 2023, a year earlier than expected, and a sharp change from the previous meeting when none of these officials were looking for hikes during that year.