NEW YORK/LONDON: The dollar rose on Thursday as US Treasury yields increased and investors bet on a relatively hawkish Federal Reserve, while the British pound fell as the UK government unveiled its latest budget update.
The greenback has been falling in recent weeks as inflation data and Federal Reserve commentary implied that it could soon slow the pace of its interest rate hikes.
But at an event on Wednesday, St. Louis Federal Reserve President James Bullard showed a graphic suggesting that even dovish assumptions would require rates to rise to at least around 5%, while stricter assumptions suggest rates above 7%. Rates are currently in the 3.75%-to-4% range after a spate of aggressive hikes.
“We had a short covering euro rally and dollar sell off that’s probably run its course now. We think the dollar runs higher from here given the Fed is still the most hawkish central bank in the G10,” said Erik Nelson, macro strategist at Wells Fargo Securities.
“We have heard the ECB get more dovish. The Fed is also possibly going to shift down but from a higher level.”
Yet the dollar climbed on Thursday after US retail sales data for October, released on Wednesday, came in stronger than expected.
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