Dollar focuses on euro, inflation from highs for nearly 14 months

London — The dollar remained high against the euro for nearly 14 months as rising energy prices increased the risk that the US Federal Reserve would act faster to normalize policy.

The US currency fell slightly to $ 1.1563 per euro after rising to $ 1.1529 on Wednesday for the first time since July last year.

The dollar index, which measures the greenback against baskets of the other six major currencies, has risen nearly 0.5% in the last two sessions and has remained almost unchanged at 94.153. It brought it back near the highest of the year at 94.504, which reached last week.

Another safe haven, the Japanese yen, was a bit high at 111.29 per dollar, near the middle of the last week and a half.

Overnight, crude oil recovered to a seven-year high before taking a break from the recent surge, but natural gas jumped to a record peak in Europe and coal prices from major exporters hit record highs. I recorded it.

The Federal Reserve Board, which has previously argued that inflationary pressures will be temporary, will begin reducing monthly bond purchases in November before following up on rate hikes that could occur as early as next year. He said it was likely.

The US non-farm payrolls report, which is being closely watched on Friday, may provide additional clues to the timing of the Fed’s next move. According to a Reuters poll, economists expect continued improvement in the labor market, adding a consensus forecast on the employment of 473,000 people in September.

Later Thursday, investors will see numerous speakers from both the Federal Reserve and the European Central Bank. A joint session on inflation dynamics will be held by the Cleveland Fed and the ECB. ECB policymaker Isabel Schnabel speaks at 1400 GMT and Fed Loretta Mester speaks at 1645 GMT.

“The biggest risk to the dollar index’s rise is probably due to a significant revaluation of inflation risk by the European Central Bank,” ING’s strategist said in a note to clients.

According to FX strategist Reuters polls, the majority expect the dollar to remain dominant in the short term before making concessions to peers within a year.

Elsewhere, the turmoil over the US debt cap that supported the dollar has eased somewhat after the Senate approached a temporary deal to avoid federal debt defaults in the next two weeks.

Senate top Republican Mitch McConnell has proposed allowing his party to extend its federal debt cap until December.

“This extension can mitigate some of the short-term rising risks facing the US dollar, but it requires a firmer agreement than kicking the can to eliminate the rising risk of the US dollar,” said a strategist at the Commonwealth Bank of Australia. Is writing in the client note.

In the field of digital currencies, Bitcoin, the world’s largest cryptocurrency by market value, remained close to $ 55,800, the highest in almost five months touched on Wednesday, with the last transaction at around $ 54,686. ..

By Ritvik Carvalho