Forex – Dollars Hits Nearly 2-Week High as Fed Hints at Further Rate Hikes


© Reuters. The dollar was up sharply on Thursday.

Investing.com – The dollar rose to a nearly two-week high against its rivals Thursday, a day after the Federal Reserve raised rates and hinted at a fourth rate hike in December.

The , which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.68% to 94.52.

The Federal Open Market Committee increased the overnight funds rate to a range of 2.00% to 2.25% and delivered an upbeat assessment of the U.S. economy, hiking its outlook on domestic GDP for both .

Fed officials hinted another rate hike would follow at year-end, with more hikes expected in 2019, prompting analysts to suggest the greenback has further room to advance.

Higher U.S. interest rates tend to boost the attractiveness of the greenback.

But the fiscal hangover, trade wars and tighter monetary policy could restrain economic growth in 2019 by more than the Fed expects, resulting in an earlier pause in the hiking cycle than forecast, which could halt the dollar’s strength earlier than expected, BNP Paribas (PA:) said.

The dollar’s strong rally intraday comes despite data showing ongoing weakness in the housing market, which is expected to deteriorate further as higher interest rates typically spawn higher mortgage rates, stifling homebuying activity.

The National Association of Realtors’ fell 1.8% to 104.2 in August.

A slip in the euro, meanwhile, also helped the greenback tack on gains as investors fret about last-minute infighting in Italy’s coalition government over the 2019 budget plan.

fell 0.67% to $1.660.

Sterling was also on the backfoot against the dollar, falling 0.54% to $1.3096.

Elsewhere, rose 0.05% to C$1.3027 as the pair continues draw gains amid uncertainty as to the outcome of U.S.-Canada trade talks on NAFTA.

“The prospects of a zombie NAFTA may keep Canadian dollar under some pressure for now,” ING said.

Elsewhere, rose 0.58% to Y113.37.

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