Dollar Strengthens as Fed Signals Another Rate Hike This Year

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Summary · why it matters

The US dollar continued to strengthen against major currencies in trading on the New York foreign exchange market on Thursday, September 24, buoyed by expectations that the Fed may raise interest rates again this year after several Fed officials signaled support for tighter monetary policy to curb inflation. The dollar index rose 0.15% to 101.28 after the Fed just raised rates by 0.25% at last week's meeting. Philadelphia Fed President Anna Paulson said the Fed may need to continue raising rates to bring inflation back to its 2% target, while Fed Board Governor Michael Barr said the Fed needs to keep raising rates, and New York Fed President John Williams said it is reasonable for the Fed to raise rates again before the end of this year. Most recently, the CME Group's FedWatch Tool indicated that investors priced in a 69% chance that the Fed will raise rates by 0.25% to 4.00-4.25% at the October meeting, up from 55.4% last week, and a 50.3% chance that the Fed will raise rates by another 0.25% to 4.25-4.50% at the December meeting, up from 41.7%. Meanwhile, the yield on 30-year US Treasury bonds surged to 5.440%, the highest since 2004, and the 10-year yield surged to 5.133%, the highest since July 2007. On the latest economic data, the US Labor Department reported that initial jobless claims fell by 1,000 to 197,000, below the forecast of 201,000, and the US Commerce Department reported that new home sales rose 6.4% to 684,000 units in August, above the forecast of 615,000 units.

Impact on assets 4

Carbon Removal (DAC)▲ · 1 stocks
CME Group Inc
CME
▲ PositiveDemandrelevance

CME Group's FedWatch Tool is cited as the market gauge showing rising odds of Fed rate hikes, boosting trading/hedging activity.

Others▲ · 3 stocks
％Effective Federal Funds Rate
EFFR
▲ PositiveMonetaryrelevance

Fed officials signal further rate hikes and markets price in higher odds, pushing the effective fed funds rate higher.

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