- BIST10011,722-2.89%
- USD49.45+0.05%
- EUR55.62+0.37%
- GOLD4,181.10+0.26%
- INTEREST37.00%-1.00
- BITCOIN81,434-0.08%
- October 17, 202614°
- BIST10011,722-2.89%
- USD49.45+0.05%
- EUR55.62+0.37%
- GOLD4,181.10+0.26%
- INTEREST37.00%-1.00
- BITCOIN81,434-0.08%
- October 17, 202614°
US data pushes the dollar to a two-month high
The manufacturing PMI in the US stood at 57 in September, while the services PMI reached a high level of 58.7. Following the data, pricing for a 25-basis-point Fed rate hike next month rose to 70%, while the dollar index climbed to 101.24.
The dollar index rose to 101.24 on data pointing to strength in the US economy and expectations that the Fed could continue raising interest rates. The index thus reached its highest level in nearly two months, while geopolitical risks in the Middle East also increased demand for the dollar as investors turned to cash.
The US manufacturing Purchasing Managers' Index (PMI) rose to 57 in September. This was its highest level in 52 months, while the services PMI reached a 59-month high of 58.7, exceeding market expectations.
It was assessed that stronger economic activity and rising energy bills could push the Fed toward a more hawkish stance. In money markets, pricing for a 25-basis-point increase in the bank's policy rate next month rose to 70%.
The dollar index had previously reached 101.49 on July 29.
Analysts assess the dollar's outlook
Rabobank Senior FX Strategist Jane Foley said the PMI data showed that the strength of the US economy had reached a level that could concern the Fed's hawkish members.
Foley said that, alongside the strong PMI results, rising oil prices and remarks by Fed Board Member Michael Barr that further rate hikes might be necessary had strengthened market expectations of another rate increase next month.
Referring also to expectations that the European Central Bank will continue raising interest rates, Foley said the euro area's status as an energy importer could limit the euro's upside potential. Foley added that next year's French presidential election was another factor that could put pressure on the euro.
Oil and risk appetite determine the dollar's direction
Kyle Chapman, FX Markets Analyst at London-based Ballinger Group, said the dollar's appreciation was driven by the Fed's shift toward a more hawkish policy stance, weaker risk appetite and strong oil prices.
Chapman noted that US short-, medium- and long-term bond yields rose after Warsh reaffirmed his commitment to discipline in monetary policy.
Francesco Pesole, FX Strategist at ING Group, also said strong US PMI data, rising oil prices and weak risk appetite were supporting the dollar. Pesole said the dollar's move appeared to have gone somewhat too far relative to the underlying indicators.
Pesole said that if any of the data due to be released in the US exceeds expectations, markets could fully price in a Fed rate hike in October, which could push short-term rates even higher. If this risk does not materialize, he said, the dollar index could return to the 100-100.5 range in the coming weeks.
Pesole said the dollar-yen exchange rate continued to pose downside risks for the dollar. He said a rapid rise in the exchange rate could prompt Japanese officials to intervene, adding that such a move could cause the dollar to weaken broadly against other currencies.
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