The dollar held near a two-month high on Thursday as strong US business activity data pushed up bets on another Federal Reserve rate hike. The Swiss franc slid to its lowest level since May 2025 after the Swiss National Bank held rates steady, while the Norwegian crown rose after its central bank hiked. The euro touched a two-month low against the dollar.
The dollar steadied near its two-month peak after a sharp rally driven by expectations of additional Fed interest rate hikes, following strong economic data and a hawkish shift in central bank rhetoric.
Fed hawkishness keeps yields elevated
Two-year Treasury yields, highly sensitive to policy rate expectations, hit their highest level since May 2024 after posting their biggest daily rise since April 2025 on Wednesday, as strong business activity data reignited inflation concerns. The Fed raised rates and signaled further tightening last week, with Chair Kevin Warsh stressing the central bank's independence despite repeated calls from President Donald Trump for lower borrowing costs.
The hawkish stance eased concerns that a Warsh-led Fed would take a softer line on inflation, a prospect that could have weighed on the dollar and other US assets. According to ING forex strategist Francesco Pesole: "We are cautious in calling for a bottom in the dollar just yet…"
Meanwhile, the US Dollar Index was roughly unchanged at 101.12, after rising 0.56% to 101.23 on Wednesday, its firmest level since July 29. The dollar's strength sent the euro to a two-month low of $1.1369.
Franc slides, Norwegian crown rises after rate decisions
The Swiss franc fell against the euro and dollar after the Swiss National Bank left rates unchanged, as expected, while reiterating its willingness to be active in the foreign exchange market. The franc dropped 0.32% against the dollar, hitting 0.828, its lowest level since May 2025.
Norway's crown rose 0.57% to 9.457 against the dollar after its central bank raised its policy rate by 25 basis points to 4.50% and said it may hike again. The Swedish krona was flat at 9.9070 versus the dollar, after touching 9.9350 earlier, its lowest since April 2025, before the central bank kept its key rate unchanged at 1.75%.
Yen holds near three-week high on intervention watch
The dollar was little changed against the yen at 158.38, after earlier reaching 158.59, its highest level since September 3. Japan's Finance Minister Satsuki Katayama said the principles underpinning the coordinated Japan-US currency intervention in July remain intact, signaling Tokyo is prepared to act jointly again if needed.
Her remarks briefly supported the yen, though sentiment stayed fragile after last week's Bank of Japan rate hike to a 31-year high failed to convince investors that a faster tightening cycle is coming. Investors also watched energy markets, with Brent crude slightly up after jumping overnight as Iran and the United States remain far apart on ending the war.
Source: Economy News
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