On Wednesday, the dollar reached a seven-week high on hopes for an agreement to raise the nation's debt limit and prevent a default, as well as a string of positive economic indicators that imply the Federal Reserve may delay its rate cuts.
The dollar index, which gauges the value of the dollar in relation to six important currencies, increased to its highest point since late March at 103.12. At 102.85, it was recently up 0.3%.
The euro fell to a six-week low against the dollar, trading at $1.0811. It was recently traded for $1.0838, a 0.2% decrease.
“We're seeing a few factors boost the U.S. dollar today,” said Helen Given, an FX trader at Monex USA in Washington. Progress in debt-ceiling negotiations, better-than-anticipated U.S. economic statistics, and hawkish remarks from a few Fed members are all contributing to some strength.
On Wednesday, President Joe Biden and senior Republican in Congress Kevin McCarthy reaffirmed their commitment to working quickly to increase the federal government's $31.4 trillion debt limit and avert an unthinkable economic collapse.
After a protracted deadlock, both political figures decided to engage in direct negotiations. Before the federal government runs out of money to pay its obligations, which may happen as soon as June 1, a deal must be approved by both houses of Congress.
Despite the way things seem to be going, the debt limit negotiations seem to be benefiting the dollar, according to Joe Manimbo, senior market analyst at Convera in Washington.
“On the one hand, a protracted impasse tends to provide the dollar a safe-haven boost. On the other hand, any positive negotiating stance may support the dollar's resurgence.
Although there have been isolated pockets of slowdown, overall favorable U.S. data supports the idea that interest rates will stay higher for a longer period of time.
Despite figures for the previous month being drastically revised down, Wednesday's report indicated a rise in single-family homebuilding in the United States in April.
Single-family housing starts, which make up the majority of new construction, increased 1.6% last month to a seasonally adjusted annual pace of 846,000 units. Single-family starts decreased to a rate of 833,000 units in March according to updated data, as opposed to rising to a rate of 861,000 units as originally reported.
That came after news on Tuesday that, despite a smaller-than-expected increase in April retail sales in the United States, the overall trend remained positive.
The United States' industrial output increased as well in April, rising 1% over the previous month and handily exceeding forecasts.
“Recent data is painting a more resilient picture of U.S. growth compared to Europe,” said Manimbo. Furthermore, the high inflation and low unemployment on our side of the Atlantic indicate that any rate decreases in the United States are more likely to happen later rather than sooner.
After reaching a two-week high of 137.625 earlier in the day, the dollar gained 0.9% against the yen to 137.59 yen in afternoon trade.
The likelihood of a Fed rate drop in June is now zero, down from about 17% a month ago, according to the rate futures market.
On Wednesday, the Chinese yuan fell below 7 to the dollar for the first time in five months due to global unrest and further indications that China's post-COVID-19 recovery is stalling.
On the foreign exchange market, the dollar increased 0.1% to 7.0077 yuan.
Exchange rates as of 3 PM (1900 GMT).
Description RIC Change in YTD Pct Last U.S. Close Low Bid High Bid
The dollar index was 102.8600, 102.6000, +0.26%, -0.609%, 103.1200, and 102.5300.
Dollar/Euro Exchange Rate: $1.0837 $1.0862 -0.22% +1.15% +$1.0873 +$1.0811
Dollar/Yen exchange rate: 137.5900 137.6250 +136.3100 +0.89% +4.95%
149.11 Yen/Euro 148.15 +0.65% +6.28% +149.1700 +148.0800
Dollar/Swiss 0.8986 0.8966 +0.23% -2.81% +0.9026 +0.8950
Dollar/Sterling exchange rate: $1.2484 to $1.2487 ($1.2510 to $1.2422)
Dollar/Canadian 1.3451 1.3479 -0.21% -0.73% +1.3535 +1.3437
Australian Dollar 0.6659 Australian Dollar 0.6654 +0.11% -2.28% +$0.6673 +$0.6629
Swiss franc/euro 0.9740 0.9737 +0.03% -1.57% +0.9762 +0.9729
Sterling to Euro exchange rate: 0.8680 0.8698 -0.21% -1.85% +0.8720 +0.8671
NZ $0.6254 $0.6231 +0.43% -1.46% +$0.6273 +$0.6228
Dollar/Norway 10.7680 10.7170 +0.45% +9.69% +10.8410 +10.7150
Euro/Norway 11.6689 11.6240 +0.39% +11.20% +11.7310 +11.6349
Dollar/Sweden 10.4493 10.3698 +0.16% +0.40% +10.4899 +10.3837
Euro/Sweden 11.3212 11.3029 +0.16% +1.54% +11.3436 +11.2995