The U.S. dollar experienced a strong rally and is heading on Thursday toward its largest monthly gain in nearly a year. This comes as traders bet that the strength of the U.S. economy will support short-term interest rates, while awaiting the release of key inflation data.
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The dollar broke through the 1.14 level against the euro this week, touching its strongest level in 13 months at $1.1325 overnight, before stabilizing in Asian trading at around $1.1353.
At 161.73 yen, the greenback is hovering just shy of its highest level in slightly over four decades against the struggling Japanese currency.
The dollar's strength pushed gold prices below $4,000 per ounce for the first time in more than seven months, and briefly drove Bitcoin below $60,000 for the first time since 2024.
The dollar index, which measures the performance of the U.S. currency against a basket of six other major currencies, hit a 13-month high at 101.8 overnight, and started the Asian trading session at around 101.6.
The war with Iran and the sharp spike in oil prices altered market expectations for U.S. interest rate cuts this year. Furthermore, the hawkish tone adopted last week by the new Federal Reserve Chairman, Kevin Warsh, prompted traders to price in rate hikes by October.
The dollar hit a seven-month high against the British pound overnight at $1.314, and an 11-month high at 0.8139 Swiss francs.
Stock market volatility piled further pressure on the Australian and New Zealand dollars. The Australian dollar dipped to $0.6890 ahead of the release of May jobs data, losing more than 1.8% since the beginning of the week.
The New Zealand dollar, which has dropped 1.7% this week, stabilized at $0.5640, slightly above its seven-month low of $0.5631 hit on Wednesday.
Core Personal Consumption Expenditures (PCE) data for May is scheduled for release later today. It is expected to record an increase, although forecasts point to slowing inflation as oil prices decline to pre-war levels.
Reuters
