Dollar up as markets reassess rate hike bets

The dollar gained on Friday, as hawkish comments from Federal Reserve officials weighed against the idea that US inflation data this week could prompt the US central bank to slow down policy tightening.

US inflation data came less than expected, which led to support for assets that involve high risks, such as stocks, and the dollar’s decline, as markets interpreted it as an indication that the Federal Reserve may become less hawkish in raising interest rates, Reuters reported.

But central bank officials have made it clear that they will continue to tighten monetary policy. San Francisco Federal Reserve Chair Mary Daly said on Thursday she was open to the possibility of a further 75 basis point hike in September to combat soaring inflation.

By 0744 GMT, the dollar index rose 0.2% to 105.28 points, after incurring four-day losses that made it destined to record a weekly decline of 1.2%.

Traders were taking into account a 38.5 percent chance of raising the interest rate by 75 basis points in September and a 61.5 percent chance of raising it by 50 basis points.

The euro fell 0.2 percent to 1.0295 dollars. The data showed that French inflation rose 6.8 percent on an annual basis in July, while the figure in Spain was 10.8 percent, the highest since 1984.

The euro was affected by the troubles facing Europe due to the war in Ukraine and the search for non-Russian energy sources, and the German economy was affected by the lack of rain. In a new problem, a drop in the water level of the Rhine, Germany’s commercial artery, has disrupted shipping and raised its costs more than fivefold.