Dollar Heads for Second Straight Weekly Gain, First in Over Three Months, as Yields Rise and Fed Hike Bets Grow

UNITED STATES – The U.S. dollar was heading for a second straight weekly gain on Friday, the first in more than three months, as rising Treasury yields and growing bets on further interest-rate hikes by the Federal Reserve kept the currency near multi-month highs.

The euro fell to a two-month low of $1.1370 and was on track for a third straight weekly decline, while sterling slipped near a three-month low of $1.3220. The dollar index rose more than 1% over the week, touching a two-month high before easing slightly to 101.2.

The Japanese yen hovered around 158.8 per dollar. Expectations of further monetary tightening were reinforced by the hawkish tone of Fed officials: Philadelphia Fed President Anna Paulson said “a modest further tightening may be warranted,” while New York Fed President John Williams said “another rate increase may be appropriate by the end of the year.”

The dollar was also lifted by the oil market, which rose more than 3% on Thursday after a Houthi missile attack on Saudi Arabia. The attack revived fears of supply disruptions and added to inflation risks, further strengthening the case for higher rates for longer.

Analysts estimate that the combination of expensive energy, high yields and hawkish Fed messaging is creating favorable ground for the dollar in the short term, while attention now shifts to upcoming economic data that will shape the central bank’s next move.

Source: Reuters