New York - The dollar rose to its highest in more than a week on Wednesday on outlooks for US and European interest rates and as investors saw the sell-off on US President Donald Trump’s health-care setback as overdone.
European Central Bank policymakers were wary of changing their policy message after tweaks this month upset investors and raised chances of a surge in borrowing costs.
The euro fell to $1.0741 following the report, its lowest since March 21. That propelled the dollar index, which tracks the greenback against a basket of rival currencies, to 100.130 points, its highest since March 21.
The dollar also got a boost from Chicago Fed president Charles Evans, who said he was in line with most of his colleagues in supporting further rate hikes this year.
The dollar fell to its lowest in four months on Friday after the US House of Representatives pulled a bill to rewrite the health-care system backed by President Donald Trump. Investors saw it as an indication that Trump might have difficulty with other parts of his agenda, including tax reform and fiscal spending that are likely to increase US inflation. Those fears may have been overdone, analysts said, and with Fed officials still lining up to support further interest rate hikes, the dollar is on solid footing.
“The sell-off in the dollar that we saw in reaction to the news on Friday was probably a bit of an overreaction,” said Shaun Osborne, currency strategist at Scotia Capital in Toronto. Osborne also pointed to technical factors in the dollar/euro trade as the euro has approached the $1.09 mark.
Meanwhile, Bloomberg reports that the rand reversed the deepest declines in emerging markets yesterday and government bonds snapped four days of losses after three of the top six officials in the ruling party were said to oppose President Jacob Zuma’s plan to dismiss Finance Minister Pravin Gordhan.
The rand added 0.5 percent to R12.9307 to the dollar as of 3.38pm, reversing losses of as much as 1.3 percent.