FOREX-Dollar hits 1-year high as Fed tightening in focus, iron ore prices boost Aussie

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LONDON, Sep 30 (Businesshala) – The dollar rose to a one-year high on Thursday against a basket of peers, noting that the Federal Reserve will ease its monetary stimulus from November, while a jump in iron ore prices dented the commodity. promoted. -Linked Australian Dollar.

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The safe-haven greenback has made sharp gains in the past two sessions on worries that the Fed may begin to withdraw its economic support as global growth slows and inflation remains high. Spikes in bond yields have added to the strength of the currency.

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The rise comes despite a political deadlock in Washington over the US debt limit, which threatens many of the government shutdowns.

The dollar index – which measures the currency against a basket of six rivals – rose to 94.504 by noon in London, the highest level since September 28 last year, higher than Wednesday’s high of 94.435.

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The yield on the benchmark 10-year Treasury note stood at 1.5289%, hitting a near mid-June high of 1.5670% on Tuesday.

“The move (in the dollar index) was broad and there were no particularly large increases in US yields on that day, nor were there any major equity corrections,” ING said in a note to clients. “It appears the move may be driven by quarter-end corporate and institutional flows.”

The dollar bought 112.06 yen, surpassing its February 2020 high on Wednesday. It was on track for its worst monthly performance since March.

The euro fell 0.24% to $1.15705, close to Wednesday’s 14-month low of $1.15895.

“Amid this new low of the year, we continue to see a downside risk to the spot (euro),” said Danske Bank Chief Analyst Christopher Kjör Lomholt.

“A cyclical recession, higher real rates in 0-5yr, as a means to weigh on global inflation, central bank divergence and valuations are generally all inputs that suggest a weaker EUR/USD.”

Speaking at a European Central Bank forum on Wednesday, Fed Chair Jerome Powell, ECB President Christine Lagarde and Bank of England Governor Andrew Bailey said they were monitoring inflation following a rise in energy prices and production bottlenecks.

The 3-month euro-dollar cross currency swaps on Wednesday tightened slightly to -21.25 basis points after reaching their widest level since December 2020.

“A sudden sharp dollar bid in the 3-month EUR/USD cross-currency market indicates that foreign banks (not foreign banks in the US) are operating in the dollar market with domestic funds and dollars for funding at the end of the quarter.” There are shortages and scuffles,” he said. Sebastian Galli, senior macro strategist at Nordea Asset Management.

“This is a sure sign of excessive leverage in foreign financials in the USD market (local affiliates are independently regulated by the US).”

The risk-sensitive Australian dollar gained 0.5% to $0.7206, falling 0.9% overnight, as iron ore prices stalled ahead of the Golden Week holiday in China, Australia’s top trading destination.

Even a rebound in monthly Chinese services data “has gone some way to allay fears that the apparent slowdown in China’s growth of late is turning to the downside,” said NAB’s head of FX strategy, Ray Attrill. .

Sterling rose 0.1% to $1,34,357 but remained overnight at a nine-month low of $1.3412 on rising natural gas prices and concerns about a nearly week of petrol shortages in Britain.

Cryptocurrency markets saw a slight improvement in overall risk sentiment after days of gloom, as Bitcoin rose 5% to $43,567 and Ether jumped 6.4% to $3,034.09.

Both coins are down between 20%-27% from their September peak.

Reporting by Rithvik Carvalho; Additional reporting by Kevin Buckland in Tokyo, Editing by William McLean and Hugh Lawson

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