Dollar climbs on talk of two US rate hikes this year

The dollar climbed for a fifth straight day against a basket of major currencies, on track for its best streak in almost a year, as investors priced in the possibility of two US interest-rate hikes this year from the Federal Reserve.

St Louis Fed president James Bullard said Thursday in prepared remarks that another US interest rate hike “may not be far off.”

Mr Bullard’s comments followed similar remarks on Wednesday in which he said that a rate hike could come as soon as next month. That was in line with similarly hawkish comments from other U.S. policymakers earlier in the week.

“Hawkish Fed talk this week has caught a market that has largely underestimated the risk of US rate rises, while lighter, pre-holiday trade seems to be enhancing the dollar’s resurgence,” said Western Union Business Solutions senior market analyst Joe Manimbo in a note to clients.

Some financial markets will be closed for the Good Friday holiday.

Jobless figures

The dollar fell modestly in early North American trading following data showing a fall in durable goods orders and a slight uptick in the number of Americans filing for unemployment benefits, but remained higher on the day.

The greenback earlier hit an eight-day high of 96.364 against a basket of major currencies, putting it in line for its longest winning streak since early April 2015.

The dollar index was last up 0.2 percent to 96.266. It has risen about 1.2 percent so far this week, its second-best weekly gain in four months.

“Some of the Fed governors have been ... giving a little bit more of a hawkish stance than the market was prepared for, and so we’re adjusting ever so slightly,” said HSBC’s head of currency research, David Bloom, in London.

Societe Generale strategist Alvin Tan in London added that gains against sterling, which has fallen more than 2.5 percent this week as the odds of a British exit from the EU have narrowed, had also boosted the dollar.

Sterling was flat on the day at $1.4112.

The euro hit an eight-day low of $1.1144, having lost nearly 1 per cent so far this week, with attacks in Brussels on Tuesday bruising sentiment.

It was last down 0.25 per cent at $1.1155.

The attacks in Belgium were seen as exacerbating the possibility of Britain leaving the European Union, further undermining the euro as well as the pound.

Reuters