Dollar up amid optimism about US debt ceiling talks

US dollar approached its highest level in nearly six months against the yen today, Friday, and pushed the euro to its lowest level in more than seven weeks, as optimism about government debt ceiling talks in Washington fueled expectations that US interest rates would remain high for a longer period.

According to “Reuters”, Democratic negotiators told US President Joe Biden on Friday that they are making “steady progress” in talks with Republicans with the aim of avoiding a debt default crisis for the United States, just days after Biden and Republican Kevin McCarthy, Speaker of the House confirmed Their intention is to conclude an agreement soon to raise the government debt ceiling of $31.4 trillion

This allayed fears of an unprecedented catastrophic default, prompting markets to revise their expectations about the path of US interest rates.

Meanwhile, data indicating that fewer Americans filed new applications for unemployment benefits than expected last week increased expectations that the Federal Reserve (the US central bank) may raise interest rates again next month in an attempt To control inflation

The dollar remained high in Asian trading on Friday, recording in the latest transactions 138.47 yen, after approaching the highest level in nearly six months at 138.75 against the yen in the previous session.

The dollar is heading for a weekly gain of about 2 percent against the Japanese currency, in its largest rise since February

The euro fell to its lowest level in more than seven weeks at 1.0760 against the dollar, while the dollar index rose 0.07 percent to 103.57 points, close to the highest level in two months, which it recorded on Thursday, at 103.63 points.

The index tended to rise for the second week in a row, by about 0.9 percent

According to the (Feed Watch) tool of the (CME) group, financial markets now expect by 33 percent that the Federal Reserve will raise interest rates by another 25 basis points next month, compared to expectations of only about ten percent in the previous week.

Dealers also lowered expectations about the size of the expected rate cut later this year, with rates expected to rise just above 4.6 percent by December.

US Treasury bond yields rose on the back of the Federal Reserve’s hawkish policy in raising interest rates and in light of the increased risk appetite. Yields increase with the decrease in bond prices

The two-year Treasury bonds settled at 4.2510 percent, while the ten-year bond yields recorded 3.6402 percent in the latest transactions.

Among other currencies, the pound sterling fell 0.1 percent to $1.2396.

The Australian dollar rose 0.2 percent to 0.6635 against the dollar

The yuan fell in both transactions inside and outside China to the lowest level since last December, with the rise of the dollar and fears of a faltering economic recovery in China.