# Dollar makes broad gains on inflation worries
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-10-06
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Dollar Rises on Inflation and Rate Hike Concerns
Meta Description: Gain insight into the surge in energy prices, inflation fears, and interest rate hikes impacting the dollar and global markets. Stay informed!
URL: https://financedigest.com/dollar-makes-broad-gains-on-inflation-worrieshtml

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By Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar rose on Wednesday toward the 1-year high touched last week as surging energy prices fuelled concerns about inflation and interest rate hikes, knocking investors’ appetite for riskier assets and driving flows to safe-havens.

Shares fell and government bond yields rose across the world on Wednesday as oil prices hit their highest in seven years.

What you are seeing this week is more inflationary fears percolating into the overall market,” said Minh Trang, senior currency trader at [Silicon Valley Bank](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources") in Santa Clara, California.

Rising inflationary pressures could pose headwinds to growth and have implications for how soon the Federal reserve can raise [interest rates](https://www.financedigest.com/hotel-investors-should-they-be-worried-about-a-potential-economic-pause-delving-into-inflation-interest-rates-recession-etc.html "‘Hotel Investors – should they be worried about a potential economic pause?’ delving into inflation, interest rates, recession etc").

The Federal Reserve has said it is likely to begin reducing its monthly [bond purchases as soon as November and then follow it up with interest rate](https://www.financedigest.com/stocks-bonds-extend-rally-on-hopes-rate-hikes-ease.html "Stocks, bonds extend rally on hopes rate hikes ease") increases, as the U.S. central [bank’s turn from pandemic crisis policies gains](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") momentum.

The question will be, does it force the [Fed to move faster than expectations,”](https://www.financedigest.com/dollar-set-for-weekly-loss-amid-expectations-fed-will-slow-hikes.html "Dollar set for weekly loss amid expectations Fed will slow hikes") Trang said.

The U.S. [Dollar Currency](https://www.financedigest.com/worst-not-over-for-em-currencies-as-u-s-dollar-thunders-on-reuters-poll.html "Worst not over for EM currencies as U.S. dollar thunders on: Reuters poll") Index, which measures the greenback against a basket of six currencies, was 0.3% higher at 94.3. The index [hit a 1-year high of 94.504 last week](https://www.financedigest.com/sterling-hits-2-1-2-week-high-eyes-on-boe.html "Sterling hits 2 1/2 week high, eyes on BoE").

The U.S. [payrolls report at the end of the week](https://www.financedigest.com/dollar-near-one-week-high-as-traders-prepare-for-powell-payrolls-tests.html "Dollar near one-week high as traders prepare for Powell, payrolls tests"), which could provide clues to the U.S. Federal Reserve’s next move, [remains a point of focus](https://www.financedigest.com/european-bourses-steady-as-focus-remains-on-key-economic-data.html "European bourses steady as focus remains on key economic data") for investors.

Friday’s non-farm payrolls [data is expected to show continued improvement in the labor](https://www.financedigest.com/dollar-firms-after-u-s-labor-data-suggests-more-rate-hikes.html "Dollar firms after U.S. labor data suggests more rate hikes") market, with a forecast for 473,000 jobs to have been added in September, a Reuters poll showed.

“If we are somewhere in the ballpark … it supports the dollar trend that we have been seeing,” Trang said.

GRAPHIC: US [nonfarm payrolls](https://www.financedigest.com/dollar-tumbles-as-u-s-nonfarm-payrolls-show-mixed-picture.html "Dollar tumbles as U.S. nonfarm payrolls show mixed picture") https://fingfx.thomsonreuters.com/gfx/mkt/akpezqdgmvr/Pasted%20image%201633526576693.png

U.S. private payrolls increased more than expected in September as [COVID-19 infections](https://www.financedigest.com/global-covid-19-cases-hit-250-million-eastern-europe-infections-at-record-levels.html "Global COVID-19 cases hit 250 million, eastern Europe infections at record levels") started subsiding, allowing Americans to travel, frequent restaurants and reengage in other high-contact activities, the ADP National Employment Report showed on Wednesday.

Sterling/dollar implied volatility, a gauge of [expected swings](https://www.financedigest.com/portuguese-airline-tap-swings-to-profit-earlier-than-expected.html "Portuguese airline TAP swings to profit earlier than expected") embedded in currency options, rose to a seven-month high around 7.9% on Wednesday, as soaring energy prices and a surge in bond yields sent the pound 0.4% lower against the greenback.

On Wednesday, Poland’s central bank raised its main interest rate to 0.5% from 0.1% on Wednesday, it said in a statement, moving to increase borrowing costs earlier than analysts had [expected to counter a surge in inflation](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected"). The [move helped lift the Polish](https://www.financedigest.com/transfer-firm-moves-into-polish-markets-with-the-unbanked-in-mind.html "Transfer Firm Moves Into Polish Markets With The Unbanked In Mind") zloty up about 0.4%.

The greenback’s strength, combined with an aversion toward riskier currencies, sent the New Zealand [dollar down 0.7% despite New Zealand’s central bank](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") hiking interest rates on Wednesday for the first time in seven years and signalling further tightening to come.

Meanwhile, Bitcoin, the world’s biggest cryptocurrency by [market value](https://www.financedigest.com/automotive-hardware-market-is-projected-to-reach-a-market-value-in-excess-of-us-100-bn-by-2029-end.html "Automotive Hardware Market is projected to reach a market value in excess of US$ 100 Bn by 2029 end"), jumped hit 5.09% to $54,124.02, its highest since May.

(Reporting by Saqib Iqbal Ahmed, Editing by William Maclean)


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