SINGAPORE (Reuters) – Safe harbor demand pushed the dollar near a two-month high on Wednesday as talks dragged on with no prospect of an imminent resolution to the U.S. debt ceiling.
Treasury Secretary Janet Yellen has warned that the federal government may not have enough money to pay all its bills as early as June 1, increasing the risk of damaging defaults.
Investors largely shunned riskier investments as separate talks between the White House and Republicans to raise the borrowing limit ended on Tuesday without any sign of progress.
Market sentiment has been closely aligned with the progress of the negotiations, said Commonwealth Bank of Australia economist Harry Otley. pointed out that it does.
The dollar index, which shows the value of the US currency against six major rivals, was at 103.51 early in Asia, just below its overnight two-month high of 103.65. The index rose about 2% in May.
The yen hit a six-month low overnight at $138.91 to $138.58, while the pound rose 0.11% to $1.2424 on the day. traded.
Hawkish remarks by Federal Reserve officials have also boosted the dollar, with traders expecting rates to stay high for a long time.
The CME FedWatch tool showed the market priced in a 27% chance of a 25 basis point rate hike in June, following the Fed’s quarter-point rate hike earlier this month.
Investors will get more clues about policy from the minutes of the Fed’s May meeting scheduled for later on Global Day.
“The basic view of the committee leadership is that perhaps the tightening cycle is over,” said Kevin Cummins, chief economist at NatWest Markets.
“Recent comments from several officials appear to be interested in further rate hikes, and this sentiment may be reflected in the tone of the minutes.”
The kiwi rose 0.03% to $0.6249 ahead of the Reserve Bank of New Zealand’s rate decision due around 0200 GMT.
“We expect the RBNZ to deliver another significant 50 basis point rate hike today, 20 months into the tightening cycle,” CBA currency strategist Carol Conn said.
“Even if the RBNZ chooses to hike rates by 25bps, it will likely signal further tightening and raise cash rate forecasts.”
The Australian dollar stabilized at $0.6610.
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Currency bid price as of 0110 GMT
all spots
Spots in Tokyo
european spot
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Tokyo Foreign Exchange Market Information from the Bank of Japan
Reporting by Ankur Banerjee, Singapore Edited by Shri Navaratnam
Our criteria: Thomson Reuters Trust Principles.