Dollar rises amid optimism about the US debt ceiling talks

The dollar approached its highest level in nearly six months against the yen on Friday and pushed the euro to its lowest level in more than seven weeks, as optimism about government debt ceiling talks in Washington fueled expectations that US interest rates would remain high for longer.

Democratic negotiators told US President Joe Biden on Friday they were making “steady progress” in talks with Republicans aimed at averting a debt default crisis, just days after Biden and House Speaker Kevin McCarthy confirmed their intention to strike a deal soon to raise the debt ceiling. government of $31.4 trillion.

This allayed fears of an unprecedented catastrophic default, prompting markets to revise their expectations about the path of US interest rates.

Meanwhile, data indicating that fewer Americans filed new applications for unemployment benefits than expected last week increased speculation that the Federal Reserve may raise interest rates again next month in an effort to control inflation.

The dollar remained high in Asian trading on Friday and recorded in the latest trading 138.47 yen, after approaching the highest level in about six months at 138.75 against the yen in the previous session.

The dollar is heading for a weekly gain of about 2 percent against the Japanese currency, its biggest rise since February.

The euro fell to its lowest level in more than seven weeks at 1.0760 against the dollar, while the dollar index rose 0.07 percent to 103.57 points, close to the highest level in two months, which it recorded on Thursday, at 103.63 points.

The index tended to rise for the second week in a row, by about 0.9 percent.

According to the (Feed Watch) tool of the (CME) group, financial markets now expect by 33 percent that the Federal Reserve will raise interest rates by another 25 basis points next month, compared to expectations of only about ten percent in the previous week.

Traders have also lowered expectations about the size of the expected rate cut later this year, with rates expected to rise just above 4.6 percent by December.

US Treasury bond yields rose on the back of the Federal Reserve’s aggressive policy in raising interest rates and in light of the increase in risk appetite. Yields increase as bond prices fall.

The two-year Treasury bonds settled at 4.2510 percent, while the ten-year bond yield recorded 3.6402 percent in the latest transactions.

Among other currencies, the pound sterling fell 0.1 percent to $1.2396.

The Australian dollar rose 0.2% to 0.6635 against the dollar.

The yuan fell in both transactions inside and outside China to the lowest level since last December, with the rise of the dollar and fears of a faltering economic recovery in China.