May 29, 2023

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Dollar rises on hopes for US debt ceiling talks via Reuters

© Reuters. US dollar banknotes in a photo from the Reuters archive.

SINGAPORE (Reuters) – The dollar hit a six-month high against the yen on Friday and hit a more than seven-week low, as optimism over government debt ceiling talks in Washington raised expectations that U.S. interest rates will remain high for a longer period. .

Democratic negotiators told U.S. President Joe Biden they were making “steady progress” in talks with Republicans, days after Biden and House Speaker Kevin McCarthy confirmed they wanted to quickly reach a deal to raise the debt ceiling. $31.4 trillion government.

That eased fears of an unprecedented catastrophic default, prompting markets to revise expectations about the path of US interest rates.

Meanwhile, data indicating that fewer Americans than expected filed new applications for unemployment benefits last week raised expectations that the Federal Reserve may raise interest rates again next month in an effort to control inflation.

The dollar was higher in Asian trade on Friday and traded at 138.47 yen in recent trade, having touched a nearly six-month high of 138.75 against the yen in the previous session.

The dollar is heading for a weekly gain of 2 percent against the Japanese currency, its biggest gain since February.

The euro fell to its lowest level in more than seven weeks against the dollar at 1.0760, while it rose 0.07 percent to 103.57 points, close to a two-month high it hit on Thursday at 103.63 points.

The index rose nearly 0.9 percent for the second week in a row.

According to the CME Group’s (Feed Watch) tool, financial markets now expect 33 percent that the Federal Reserve will raise interest rates by another 25 basis points next month, up from just 10 percent the previous week. .

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Traders also lowered expectations about the size of rate cuts expected later this year, with rates expected to rise above 4.6 percent by December.

Yields rose against the backdrop of the Federal Reserve’s hawkish policy of raising interest rates and in light of rising risk appetite. As bond prices fall, yields rise.

Two-year Treasuries settled at 4.2510 percent, while the ten-year bond yielded 3.6402 percent in recent trades.

Among other currencies, the pound fell 0.1 percent to $1.2396.

The Australian dollar was up 0.2% against the dollar at 0.6635.

It fell to its lowest level in transactions in and out of China since last December, on fears of a stronger dollar and a faltering economic recovery in China.

(Prepared by Noha Zakaria for Arabian Bulletin – Editing by Dua Muhammad)