The US dollar has surged to a 13-month high against the euro, breaking the $1.14 level and reaching $1.1325 overnight. This increase is attributed to traders betting on a strong US economy and the possibility of a rate hike by the Federal Reserve as soon as October.
Market Expectations
Since the start of May, 2-year US Treasury yields have risen by 27 basis points to 4.15%, while Europe’s benchmark German 2-year yields have fallen by 7 basis points to 2.56%. The gap in favor of US yields has widened by 20 basis points in the same period, reaching 150 basis points at the 10-year tenor.
According to Steve Englander, head of global G10 currency research at Standard Chartered in New York, the move in rates and the dollar reflects expectations of cyclical and structural US economic outperformance. Englander believes that strong productivity growth, partly driven by AI, should support higher earnings and lead to dollar-positive capital inflows.
Impact on Other Currencies
The surge in the dollar has pushed gold below $4,000 an ounce for the first time in over seven months and briefly sent bitcoin under $60,000 for the first time since 2024. The Aussie and kiwi currencies have also been under pressure, with the Aussie down more than 1.8% for the week and the kiwi down 1.7%.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
