# Dollar bounces as Fed seen keeping up aggressive rate hikes
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-18
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar index hits three-week high as investors reassess Fed
Meta Description: Stay updated on the US dollar's performance as investors reassess Fed's July meeting minutes, anticipating aggressive rate hikes to curb inflation.
URL: https://financedigest.com/dollar-bounces-as-fed-seen-keeping-up-aggressive-rate-hikeshtml

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By Karen Brettell

NEW YORK (Reuters) – The U.S. [dollar index hit](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") a three-week high on Thursday as investors reevaluated Wednesday’s minutes from the Federal Reserve’s July meeting as more hawkish than originally interpreted and after data showed solid U.S. economic momentum.

The dollar pared [gains on Wednesday after the meeting minutes showed that Fed](https://www.financedigest.com/asian-shares-gain-as-fears-about-rapid-fed-hikes-bank-crisis-fade.html "Asian shares gain as fears about rapid Fed hikes, bank crisis fade") officials were concerned the U.S. [central bank could raise rates](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") too far as part of its commitment to get inflation under control.

Investors reconsidered this interpretation on Thursday, however, and focused on the likelihood that the U.S. central bank will continue to aggressively [hike rates](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike") to stem inflation.

“The Fed’s rhetoric has been very steadfast from almost everybody – we’re got to [raise rates](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike"), we’ve got to raise rates, rates are going higher,” said Joseph Trevisani, senior analyst at FXStreet.com in New York.

The minutes also flagged what will be an important dimension of the [Fed’s debate in coming months – when to slow down the pace of rate](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") increases.

“Except for the part about slower pace of [rate hikes](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike"), the rest of the minutes read very hawkish,” Win Thin, global head of currency strategy at Brown Brothers Harriman said in a report.

The dollar index was last up 0.24% at 106.88.

The [euro fell 0.35% on the day against the dollar](https://www.financedigest.com/euro-rises-after-spanish-cpi-dollar-slips-towards-8-mth-low.html "Euro rises after Spanish CPI, dollar slips towards 8-mth low") to $1.0142, while the U.S. currency dipped 0.11% against the yen to 134.92.

The odds of a 75 basis-point [hike in September have dropped to 35% since the meeting](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout") minutes, from 52% earlier on Wednesday, with a 50 basis-point hike now assigned a 65% probability.

However, consumer price inflation and jobs data for August that is due before the [Fed’s September meeting will likely impact the size of a rate hike](https://www.financedigest.com/wall-street-slips-dollar-gains-as-fed-seen-hiking-rates-in-may.html "Wall Street slips, dollar gains as Fed seen hiking rates in May").

The September meeting will also offer new information on how far Fed officials expect [rates to rise](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February"). Traders currently see the benchmark [rate peaking](https://www.financedigest.com/bank-of-england-set-to-hike-to-4-as-rate-peak-looms.html "Bank of England set to hike to 4% as rate peak looms") at 3.65% in March.

Trevisani said he expects the Fed to go up to around 4%, adding that even that is unlikely to be enough to tame [prices that are rising at an annual](https://www.financedigest.com/coca-cola-hbcs-annual-profit-beats-warns-of-price-increases.html "Coca-Cola HBC’s annual profit beats, warns of price increases") pace of 8.5%.

Meanwhile [data on Thursday showed that the economy remained relatively strong](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop"). The Philadelphia Federal Reserve’s monthly manufacturing index rose to 6.2 this month from negative 12.3 in July, topping all 30 estimates in a [poll of Reuters](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll") economists.

The number of Americans filing new [claims for unemployment benefits](https://www.financedigest.com/why-you-might-want-to-wait-until-age-70-to-claim-social-security-benefits.html "Why You Might Want to Wait Until Age 70 to Claim Social Security Benefits") also fell moderately last week.

Steeling dipped 0.27% to $1.2018 as traders worried soaring UK inflation would [mean higher interest rates and a weaker British](https://www.financedigest.com/what-brexit-mean-for-british-buyers-in-spain.html "WHAT BREXIT MEAN FOR BRITISH BUYERS IN SPAIN") economy.

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Currency bid prices at 9:36AM (1336 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 106.8800 106.6400 +0.24% 11.726% +106.9600 +106.5000

Euro/Dollar $1.0142 $1.0178 -0.35% -10.79% +$1.0193 +$1.0141

Dollar/Yen 134.9150 135.1000 -0.11% +17.23% +135.4200 +134.6500

Euro/Yen 136.84 137.47 -0.46% +5.00% +137.6500 +136.8400

Dollar/Swiss 0.9520 0.9519 +0.04% +4.39% +0.9544 +0.9501

Sterling/Dollar $1.2018 $1.2050 -0.27% -11.14% +$1.2079 +$1.1995

Dollar/Canadian 1.2914 1.2915 +0.00% +2.14% +1.2946 +1.2882

Aussie/Dollar $0.6948 $0.6937 +0.16% -4.42% +$0.6970 +$0.6899

Euro/Swiss 0.9655 0.9686 -0.32% -6.89% +0.9699 +0.9656

Euro/Sterling 0.8436 0.8446 -0.12% +0.43% +0.8466 +0.8426

NZ $0.6287 $0.6281 +0.10% -8.14% +$0.6313 +$0.6248

Dollar/Dollar

Dollar/Norway 9.6890 9.7120 -0.44% +9.76% +9.7615 +9.6510

Euro/Norway 9.8286 9.8737 -0.46% -1.83% +9.9150 +9.8213

Dollar/Sweden 10.4508 10.3695 +0.29% +15.89% +10.4529 +10.3740

Euro/Sweden 10.5996 10.5689 +0.29% +3.57% +10.6025 +10.5727

(Additional reporting by Alun John in [Hong Kong; Editing by Tomasz Janowski)](https://www.financedigest.com/citadel-accelerates-hiring-push-in-hong-kong-and-london.html "Citadel accelerates hiring push in Hong Kong and London")


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