TOKYO- The dollar pushed to a two-month high against the euro and a six-month peak versus the yen on Thursday, as a resilient US economy led traders to pare their bets on rate cuts this year.
The greenback has also benefited from demand for safe havens, paradoxically as a US debt ceiling impasse threatens a disastrous default as soon as June 1, when the Treasury has warned it would be unable to pay all its bills.
The dollar touched $1.07425 per euro early in the Asian session for the first time since March 24, and remained elevated to last trade at $1.0748. The dollar also bought 139.66 yen a level last seen on Nov. 30.
With only a week left until the “X-date” for a debt ceiling resolution, and a divided Congress also needing several days to pass legislation, investors are becoming increasingly jittery.
Fitch put the United States’ “AAA” debt ratings on negative watch on Wednesday, adding to the sense of imminent crisis.
“The dollar has seen a good, solid move higher, and there’s good reasons for it,” said Tony Sycamore, an analyst at IG Markets, pointing particularly to haven demand amid the debt ceiling standoff, as well as mounting signs of slowdowns in China and Europe.
“I believe the dollar could be on the cusp of another 2 percent move higher, and Fitch could be the trigger for it.”
The US dollar index which measures the currency against six major peers including the euro and yen, touched a two-month high of 104.01.
Sycamore said a sustained break above 104 could see the index test 106.
The latest sign of weakness out of Europe came from a worse-than-expected deterioration in German business confidence.
