# Powell’s warning on higher U.S. rates pushes dollar to 3-mth high
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-08
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar Climbs to Multi-Month Highs as Powell Warns on Rates
Meta Description: Get the latest updates on the dollar's rise against major currencies after Fed Chair Powell's inflation warnings. Stay informed with Reuters.
URL: https://financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-highhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-08t012418z1lynxmpej2701krtroptp4global-forex-1736814360414-compressed.jpg)

By Tom Westbrook

SINGAPORE (Reuters) – The dollar scaled multi-month highs against most other major currencies on Wednesday after Federal Reserve Chair Jerome Powell warned that U.S. interest rates might need to go up even faster and higher than [expected to rein in stubborn inflation](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected").

Higher rates [benefit the dollar by improving its yield and as traders](https://www.financedigest.com/how-choosing-a-compliant-broker-benefits-traders.html "How Choosing a Compliant Broker Benefits Traders") look for safety while global stockmarkets drop. \[MKTS/GLOB\]

In the [Asia session the greenback broke above its 200-day-moving average against the yen](https://www.financedigest.com/asia-shares-weigh-china-risks-yen-hits-6-month-high.html "Asia shares weigh China risks, yen hits 6-month high") for the first time this year, rising as far as 0.5% to a nearly three month high of 137.79 yen.

The [dollar hit a two-month high of $1.0528 to the euro](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"), extending Tuesday’s 1.2% jump. Sterling, the [Swedish and Norwegian crowns](https://www.financedigest.com/dollar-edges-down-from-six-week-peak-swedish-crown-jumps.html "Dollar edges down from six-week peak, Swedish crown jumps"), the Chinese yuan and the Canadian, Australian and New Zealand dollars all made multi-month lows.

Powell told lawmakers on Capitol Hill on Tuesday that recent U.S. [economic data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") was stronger than expected and so the speed and size of future hikes may also need to increase, which sent short-term U.S. [rate expectations](https://www.financedigest.com/ecbs-makhlouf-expects-50-bps-rate-hike-in-december.html "ECB’s Makhlouf expects 50 bps rate hike in December") surging. \[US/\]

[Powell is back for more testimony](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") from 1500 GMT. Ahead of that is an appearance from European Central [Bank head Christine Lagarde at 1000 GMT and, at 0930 GMT a speech from Bank of England](https://www.financedigest.com/bank-of-england-fines-former-tsb-executive-over-2018-it-failure.html "Bank of England fines former TSB executive over 2018 IT failure") committee member Swati Dhingra.

The Canadian dollar – last at 1.3772 to its U.S. counterpart and down more than 1% since Monday – may face further pressure if [Canada’s central bank holds](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates") rates steady later in the day, as expected.

If the [Fed follows through and 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") by 50 basis points in March, and even more likely the Bank of Canada strikes the pause button, the gap … is consistent with USD/CAD heading up to 1.40 or even slightly beyond,” said [Deutsche Bank](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker") strategist Alan Ruskin.

The Australian [dollar has weakened for a similar reason as the Reserve Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") of Australia has softened its tone. Having dropped 2% on Tuesday, the Australian [dollar weakened](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") a bit more a four-month low of $0.6568 on Wednesday.

[Powell’s remarks also sent short-term rate expectations higher](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate"), with traders now anticipating an almost 70% chance of a 50 basis point U.S. [rate hike](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") in March, according to CME’s FedWatch tool, up from about a 30% chance a day earlier.

Futures imply U.S. [rates peaking above 5.6% and holding higher](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") than 5.5% through 2023. Traders have a laser focus on Friday’s U.S. payrolls [data and next week’s inflation](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") figures.

If those data prints exceed expectations at all, based on what [Powell said that’d pretty much guarantee a 50-basis point hike in March,” said IG Markets](https://www.financedigest.com/jittery-markets-attempt-risk-on-rally-while-waiting-for-powell.html "Jittery markets attempt risk-on rally while waiting for Powell") analyst Tony Sycamore in Sydney.

If the hot data [continues to roll into February and March](https://www.financedigest.com/cricket-india-lose-rahul-as-england-continue-victory-march.html "Cricket-India lose Rahul as England continue victory march"), the U.S. [dollar is going to have a very firm](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") tailwind behind it.

The U.S. [dollar index rose 0.2% in Asia](https://www.financedigest.com/asia-shares-slip-dollar-strong-as-yuan-weakens.html "Asia shares slip, dollar strong as yuan weakens") trade to a more than three-month high of 105.86. Sterling fell marginally to $1.1811, its [lowest since](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020") late November. \[GBP/\]

[China’s yuan](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") hit a more than two-month low of 6.9782, just steps away from the eye-catching 7-per-dollar level. \[CNY/\]

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

Currency bid prices at 0431 GMT

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

Previous Change

Session

Euro/Dollar

$1.0530 $1.0548 -0.16% +0.00% +1.0551 +1.0528

Dollar/Yen

137.7000 137.1550 +0.41% +0.00% +137.7700 +137.2000

Euro/Yen

145.02 144.68 +0.24% +0.00% +145.1000 +144.6300

Dollar/Swiss

0.9434 0.9422 +0.15% +0.00% +0.9436 +0.9420

Sterling/Dollar

1.1815 1.1827 -0.08% +0.00% +1.1835 +1.1812

Dollar/Canadian

1.3768 1.3755 +0.08% +0.00% +1.3773 +1.3749

Aussie/Dollar

0.6575 0.6585 -0.13% +0.00% +0.6596 +0.6568

NZ

Dollar/Dollar 0.6091 0.6107 -0.22% +0.00% +0.6117 +0.6086

All spots

Tokyo spots

[Europe spots](https://www.financedigest.com/spain-still-top-spot-for-brits-retiring-to-europe.html "Spain still top spot for Brits retiring to Europe")

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Tom Westbrook; Editing by Simon Cameron-Moore)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---