Greenback hits fresh 2-month peak, Norwegian krone rises
[MILAN] The US dollar hit a fresh two-month high on Thursday (Sep 24) after a sharp rally, which was fuelled by expectations...
The US dollar reached a fresh two-month high on Thursday (Sep 24), propelled by anticipation of additional interest rate hikes from the Federal Reserve following robust economic data and a more hawkish tone. In contrast, the Swiss franc experienced a decline against the euro and dollar after the Swiss National Bank maintained interest rates as expected and hinted at further intervention in the forex market, albeit with a slightly tempered tone following recent weakening.
Norway's central bank raised its policy interest rate by 25 basis points to 4.5 percent, signaling potential further hikes. Giada Giani, an economist at Citi, noted that the Norges Bank remains more hawkish than other central banks, with a primary focus on domestic price pressures and inflation, which has been consistently above target for several quarters.
The Swiss franc depreciated 0.26 percent against the dollar to 0.8273, reversing an earlier rise. Capital Economics' chief euro area economist, Jack Allen-Reynolds, suggested that the Swiss franc could strengthen in anticipation of a global equity sell-off in 2027. Meanwhile, the Norwegian krone increased by 0.42 percent at 9.471 against the dollar, while the Swedish krona remained flat at 9.907.
The two-year Treasury yield peaked since May 2024 due to heightened concerns about inflation spurred by strong business activity data.
US purchasing managers' index and rising oil prices, coupled with cautious risk sentiment, bolstered the dollar's bullish narrative. However, the move appears stretched relative to fundamentals, and the greenback may face challenges if upcoming US data releases provide further upside surprises, potentially leading to an October Fed rate hike and further strengthening of short-term rates.
Meanwhile, Brent crude prices edged up as Iran and the US remained at odds over ending the conflict, which typically boosts the dollar due to the vulnerability of energy-importing economies' trade balances to higher crude costs.
The US dollar index climbed 0.13 percent to 101.22 after peaking at 101.31, marking its strongest level since July 29. The euro experienced a two-month low of $1.1373 as the dollar strengthened. Japanese Finance Minister Satsuki Katayama reaffirmed that the principles behind the coordinated Japan-US currency intervention in July remain intact, yet market sentiment remains fragile following the Bank of Japan's recent rate hike, which did little to convince investors of a faster tightening cycle.
The dollar rose 0.28 percent against the yen to 158.75, its highest level since September 3. HSBC's senior forex strategist, Daragh Maher, indicated that the yen may encounter difficulties in the forthcoming weeks, though the risk of forex intervention could help temper the rise in USD/JPY.
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