The dollar has once again reached an all time high , the highest in the past 11 years against an assortment of major currencies and the cause was not very difficult to fathom- rising Treasury yields helped it to prevail upon its peers and compatriots.
The Dollar Index peaked at 95.516 and overtook its previous highest of 95.481 which was set on January 23. Such a situation has not been seen since September 2003.
The index rose in the backdrop of a sliding Euro which stood at $1.1200 EUR and the Dollar hit an all time high against the Yen which stood at 120.19 yen. The common currency of the European Zone was last up 0.1% at $1.1191 while the Dollar purchased 119.94 yen down 0.2%.
Pulling out from last week’s low of 1.93 percent, the greenback, U.S. Treasury yields rose with the benchmark 10-year note nearing 2.10 percent
The rise in the Treasury yields was also driven by a rising Wall Street whose shares hit a fresh record high on Monday.
The U.S. private income and the personal consumption expenditures (PCE) index rose by a whisker while the consumer spending and housing data was weak.
Experts opine that the data revealed a mixed but firm inflation figures which did not go unnoticed by the market. It needs to be seen if the prices continue to rise. If the data suggests that the prices have bottomed out, it could be a causative agent for a summer rate hike.
Dollar bulls were disheartened by dovish signals from the Federal Reserve Chair Janet Yellen, but sentiments soon brightened after data revealed that U.S. core inflation rose more than expected.
Analysts at BNP Paribas wrote in a note to clients “Our economists continue to expect the first fed funds rate hike in September of this year and see the FOMC dropping the ‘patient’ reference at the March policy meeting,”.
The market is waiting in anticipation of a back-to-back interest rate cut later on Tuesday by the Reserve Bank of Australia.
As a result, the Aussie dollar has fallen and stood at $0.7765 from a recent high of $0.7914.