For years the greenback has benefited from a divergence between the Federal Reserve’s move to higher rates — including to rate hikes this year — and other regions. But analysts said the mood is changing.
“A game changer of a week as hawkish central bank commentary steamrolled the markets,” said Stephen Innes, senior trader at OANDA.
“Traders are now contemplating who will be next to join the lineup. No one wants to miss out on this party realising there’s a co-ordinated policy shift afoot and the chance to catch the removal of an easing bias is far too seductive for traders to ignore.”
Talk of tighter ECB rates has pushed the euro to more than one-year highs while the pound has also benefited, despite political uncertainty in Britain. Both currencies dipped in Asia but held on to most of their recent gains.
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