The dollar held near a seven-week high on Thursday after the Federal Reserve raised interest rates and signaled further monetary tightening, while gold rose more than 1% and oil prices fell for a second day as concerns over supply disruptions eased.
Dollar at highest level since July 31
The dollar index, which measures the US currency against a basket of currencies, stood at 100.11 points in the latest trading, after earlier rising to 100.33 points, its highest level since July 31.
The dollar rose alongside US Treasury yields after the unanimous rate-hike decision, which included new Federal Reserve Chair Kevin Warsh, with policymakers expecting another increase this year.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said Warsh appeared more hawkish than expected and that his guidance on future rate increases surprised markets, prompting them to reassess the monetary-policy path toward further tightening and supporting the dollar.
The US currency’s rise pushed the euro to a nearly seven-week low before it recovered to $1.1482, while sterling edged up to $1.3400 ahead of the Bank of England’s interest-rate decision. The yen hovered at 156.20 per dollar, near a two-week low, ahead of the Bank of Japan’s decision on Friday.
Oil falls for a second day
Oil prices fell after sources said Saudi Arabia was offering additional crude cargoes for shipment to Asian refineries through ship-to-ship transfers off the port of Sohar in Oman, easing some concerns about supply shortages.
Brent crude fell 1.77% to $103.95 a barrel in the latest trading, while US West Texas Intermediate crude declined 1.62% to $100.77, after both contracts fell by about $3 on Wednesday.
Hiroyuki Kikukawa, chief analyst at Nissan Securities Investment, said concerns about tight supply had eased slightly following reports that Saudi Arabia was exporting cargoes via Oman. He added that expectations of progress toward easing tensions in the Middle East ahead of next week’s US-China summit were also limiting price gains.
Gold rises 1.1%
Spot gold rose 1.1% to $4,310.22 an ounce after hitting a nearly six-week low on Wednesday.
Kelvin Wong, a senior market analyst at Oanda, said oil prices remained a key factor to watch and that a continued decline could support gold in the medium term. He said gold’s rise was also driven largely by technical factors, while higher interest rates reduced its appeal relative to yield-bearing assets.
Central-bank decisions in focus
Markets are awaiting the Bank of England’s interest-rate decision on Thursday and the Bank of Japan’s decision on Friday. Markets are pricing, according to CME’s FedWatch tool, an approximately 87% chance of at least one US rate hike by the end of the year, compared with about a 13% probability of keeping rates at their current range.
