HONG KONG, Aug 4 (Reuters) – The dollar was on the front foot on Thursday, helped by several US Federal Reserve officials pushing back against suggestions they will slow the pace of interest rate hikes, while the pound was flat ahead of a Bank of England meeting.
The dollar index, which measures the greenback against six peers, was steady in early trade at 106.39 having eked out small gains overnight. It is up around 0.5% this week, reversing the trend of the previous two weeks.
“The dollar weakened last week after the (policy setting) Federal Open Market Committee meeting because the market wanted to believe that the Fed was pivoting in a dovish manner because of slowing growth,” said Sim Moh Siong, currency strategist at Bank of Singapore.
“This week, there are a lot more FOMC speakers pushing back against this idea, all singing the same tune: ‘we are not done, and you should expect more rate hikes’,” he added .
San Francisco Fed President Mary Daly and Minneapolis Fed President Neel Kashkari overnight voiced their determination to rein in high inflation, reiterating similar messages from other officials the day before.
A Reuters poll of analysts earlier this week found 70% thought the dollar was yet to peak in this cycle, even after the dollar index hit a two-decade peak in July.
According to CME’s FedWatch tool, the market is pricing in a 58% chance of a 50 basis point rate hike at the Fed’s September meeting, and a 42% chance of a another massive 75 basis point increase.
However Sim said the dollar’s recent performance was a mixed picture as the improved risk sentiment, which has also helped equity prices in the US has been supporting risk friendlier currencies.
The Australian dollar was at USD 0.695 on Thursday morning after gaining 0.46% the day before, trying to head back above the symbolic USD 0.7 level it fell from earlier in the week after seemingly dovish remarks from the central bank.
Also in central bank news, Sterling was little changed at USD 1.2158 ahead of a BOE meeting later in the day at which most investors expect the central bank will raise rate by 50 basis points to 1.75%, the highest level since late 2008.
The decision is due at 1100 GMT.
The euro was flat at USD 1.01635 and the Japanese yen, which has borne the brunt of this week’s dollar gains, recovered a little to 133.54 per dollar.
Bitcoin was up a touch at USD 23,000.
(Reporting by Alun John; Editing bt Sam Holmes)
This article originally appeared on reuters.com