The US Dollar Rises to Its Highest Level in One Year

On Monday, the US dollar returned to a one-year high hit last week as rising inflation expectations and rising bond yields added to its appeal against its rivals, with the New Zealand dollar falling off-trend thanks to strong data, and US Treasury yields boosting Monday, continuing the trend in recent weeks with five-year bond yields climbing to their highest since February 2020 as investors ramped up their bets that the US Federal Reserve is preparing to raise interest rates early next year.

Just as inflation expectations have raised expectations of an early tightening of global monetary policy, with Danske Bank expecting two interest rate hikes from the Fed in the second half of next year,

The dollar index rose 0.1% to 94.02, heading to its highest level last week at 94.563, the highest level since September 2020, and in New Zealand, where consumer prices rose at their fastest segment since 2010, analysts thought the central bank would need to continue its path in Hiking extended even with Auckland closures.

The New Zealand dollar was a variable, having jumped nearly 0.5% to a one-month high of $0.7105 before falling back to stable at $0.7070 after the quarterly inflation reading reached its highest level in a decade. Staying near stability after hawkish comments at the end of the week from BoE Governor Andrew Bailey who said policymakers will have to act as energy prices drive consumer prices higher.

In other data, China’s economic growth recorded its slowest pace in a year in the third quarter, with energy shortages driving down factory production – while in commodities, crude oil prices rose more than 1% to test their 2018 highs, and the yuan weakened slightly after data. But given China’s slowdown, power crunch, and global signs that pressure from energy costs is hurting, it seemed to turn investors broadly cautious as they brace for a bumpy ride.