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Weekly Roundup: US dollar hits two-decade high on risk aversion and rate rise bets

currency-newsWeekly Roundup: US dollar hits two-decade high on risk aversion and rate rise bets
The safe-haven US dollar initially slipped early in the week as an increasingly upbeat market mood dented the dollar’s appeal.

However, hawkish comments from Federal Reserve policymaker Tom Barkin and stronger-than-expected consumer confidence data helped USD recover.

As market sentiment soured through the week, the ‘greenback’ caught more bids. But slowing employment growth from June to August, according to the latest ADP figures, capped the US currency.

USD exchange rates then surged after the ISM manufacturing PMI exceeded forecasts, boosting bets for another 75-bp hike from the Fed in two weeks’ time. As a result, the US dollar index hit a fresh two-decade high.

Friday saw the ‘greenback’ trim some of these gains, however. A return of risk appetite dented USD, while disappointing wage growth dampened rate hike bets.

Risk sentiment and rate hike expectations will likely continue driving USD movement this week, with worries about a eurozone recession already weighing on European markets.

The ISM services PMI on Tuesday could cause sharp movement. After the above-forecast manufacturing PMI, investors may be hoping for a positive surprise. A strong survey score should boost USD, while a weak one will likely dent it.

A handful of Fed speeches this will could also impact the ‘greenback’. If policymakers at the US central bank maintain their hawkish rhetoric, the US dollar could hit new highs.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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