TOKYO- The US dollar rose to a five-week high against major peers on Monday as the safe-haven currency benefited from inflation worries at home and growth concerns globally, extending gains after its biggest weekly increase since September.
The Turkish lira sank to a two-month low after weekend elections looked headed for a runoff, while the Thai baht rallied almost 1 percent after Thailand’s opposition routed military-allied parties also in weekend polls.
The greenback was buoyed by a rise in Treasury yields after a survey of US consumers’ long-term inflation expectations jumped to the highest since 2011, putting a possible Federal Reserve rate hike next month back in play.
Traders currently put those odds at 13 percent, from close to zero prior to the University of Michigan’s poll. However, there are still as many as three quarter-point cuts priced into the market by year-end.
“Too many FOMC (Fed) rate cuts are priced for the near term in our view,” Joseph Capurso, head of international economics at Commonwealth Bank of Australia (CBA), wrote in an client note.
“We acknowledge there are tentative signs the US labor market is cooling and underlying inflation is easing, (which) imply a high bar to rate hikes,” he added. “But the still-high inflation and tight labor market also imply a high bar to rate cuts in the near term too.”
China, meanwhile, is at the center of renewed worries about a global recession after a spate of disappointing economic data including imports and inflation pointed to tepid domestic demand. More evidence could come from Tuesday’s retail sales report.
The Chinese yuan dipped to a fresh two-month low of 6.9740 per dollar in offshore trading on Monday before coming back slightly to 6.9694. -Reuters
