# Dollar jumps as Powell flags higher terminal rate
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-07
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Dollar Rises as Powell Indicates Higher Interest Rates
Meta Description: Find out how the dollar strengthens against other currencies post Fed Chair Jerome Powell's statements on potential rate hikes and expectations for the
URL: https://financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-ratehtml

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By Karen Brettell

NEW YORK (Reuters) – The dollar extended gains against a basket of currencies on Tuesday after Federal Reserve Chair Jerome Powell said that the U.S. central bank will stay the course until the job is done, adding that the ultimate level of interest [rates is likely to be higher](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") than previously anticipated.

Powell also said that the [Fed is prepared to increase the pace of rate hikes](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") if data indicates it is warranted. That [comes after the bank](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") slowed the pace of its tightening to 25 basis points at its last two meetings, following larger hikes last year.

Powell is explicitly [talking about a higher](https://www.financedigest.com/maserati-aims-at-driving-margins-higher-before-any-spin-off-talk.html "Maserati aims at driving margins higher before any spin-off talk") target for interest rates. This is something that the market has been talking about but obviously hasn’t been fully priced in,” said Chris Zaccarelli, chief [investment officer at Independent Advisor](https://www.financedigest.com/5-tips-choosing-right-investment-advisor.html "5 tips for choosing the right investment advisor") Alliance in Charlotte, North Carolina.

Fed funds futures [traders raised bets that the Fed will hike rates](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") by 50 basis points at its March 21-22 meeting to 56% after Powell’s comments. A 25 basis points increase is now seen as a 44% probability.

Investors will be closely watching the Fed’s updated “dot plot” of [rate expectations at March’s meeting for further indications of how high Fed officials expect to raise rates](https://www.financedigest.com/fed-rates-up-boe-up-ecb-up-stocks-up.html "Fed rates up, BoE up, ECB up, stocks up").

The market is zeroed in on the March 22 ‘dot plot’ for a clear [signal” of what the terminal rate](https://www.financedigest.com/interest-rate-hold-signals-confidence-in-uk-economy.html "Interest rate hold signals confidence in UK economy ") is likely to be, said Adam Button, chief currency analyst at ForexLive in Toronto.

Traders are now pricing for the [rate to peak](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 5.57% in September.

The dollar index was last up 0.70% on the day at 104.97. The euro dropped 0.64% to $1.0615.

The greenback [gained 0.45% to 136.50 Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor").

Sterling slipped 0.95% to $1.1913, after getting as low as $1.1880, the lowest since Jan. 6.

The [Aussie dollar](https://www.financedigest.com/aussie-dollar-firm-as-bonds-tumble-yen-looks-past-boj.html "Aussie dollar firm as bonds tumble, yen looks past BOJ") also continued to underperform, dropping to $0.6605, the lowest since Nov. 22.

It had slid earlier after the Reserve Bank of Australia (RBA) [raised its cash rate by 25 basis points](https://www.financedigest.com/how-to-raise-my-credit-score-40-points-fast.html "How to raise my credit score 40 points fast") to the highest in more than a decade, as was expected, but suggested it might be nearly done tightening.

========================================================

Currency bid prices at 10:37AM (1537 GMT)

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

Previous Change

Session

Dollar index 104.9700 104.2600 +0.70% 1.430% +105.2600 +104.1100

Euro/Dollar $1.0615 $1.0684 -0.64% -0.93% +$1.0695 +$1.0587

Dollar/Yen 136.4950 135.9250 +0.45% +4.13% +136.9000 +135.5600

Euro/Yen 144.89 145.17 -0.19% +3.27% +145.4400 +144.6100

Dollar/Swiss 0.9382 0.9308 +0.80% +1.47% +0.9398 +0.9288

Sterling/Dollar $1.1913 $1.2027 -0.95% -1.50% +$1.2065 +$1.1880

Dollar/Canadian 1.3698 1.3612 +0.65% +1.11% +1.3726 +1.3600

Aussie/Dollar $0.6629 $0.6732 -1.55% -2.77% +$0.6748 +$0.6605

Euro/Swiss 0.9959 0.9942 +0.17% +0.65% +0.9965 +0.9926

Euro/Sterling 0.8907 0.8880 +0.30% +0.71% +0.8915 +0.8858

NZ $0.6158 $0.6197 -0.66% -3.05% +$0.6221 +$0.6140

Dollar/Dollar

Dollar/Norway 10.5890 10.4290 +1.80% +8.18% +10.6160 +10.4060

Euro/Norway 11.2452 11.1294 +1.04% +7.16% +11.2572 +11.1067

Dollar/Sweden 10.6296 10.4478 +1.09% +2.13% +10.6731 +10.4202

Euro/Sweden 11.2849 11.1629 +1.09% +1.21% +11.3110 +11.1400

(Reporting by Karen Brettell; additional reporting by Sinead Carew in New York; Editing by Jason Neely and Andrea Ricci)


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