USD Index at 14 Year High After Bullard’s Comments

The dollar soared to its highest since April 2003 against a basket of currencies on Wednesday, reaching its strongest in a year against the euro as major banks and investors debated the possibility of another move toward euro-dollar parity.

After a week-long rally driven by the post-election surge in U.S. bond yields, some of the major banks have been sounding more cautious on the dollar’s immediate prospects.

But fueled by expectations of an inflationary push from the administration of President-elect Donald Trump that would spur more rises in Federal Reserve interest rates, it advanced past $1.07 per euro EUR=EBS for the first time since the start of December 2015.

It also rose half a percent against the yen to its highest since June 1, pushing the dollar index .DXY up another 0.3 percent to 100.53. It has gained almost 3 percent since Trump’s election victory just over a week ago.

Notably, however, St Louis Fed chief James Bullard’s comment that it would be a surprise now if the U.S. central bank did not raise rates next month had little impact on the market.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza