The US dollar surged to a more than 13-year peak on Wednesday, bolstered by upbeat U.S. economic data that showed the economy on track for steady growth and reinforced expectations of interest rate increases by the Federal Reserve next month and in 2017. The DXY, which tracks the greenback against the six major currencies, rose 0.6% to 101.63, after earlier soaring to a 13-1/2 year peak of 101.91. It has climbed more than 3% since President-elect Donald Trump’s victory two weeks ago. Investors are betting the dollar will be strengthened by Trump’s plans for fiscal stimulus, which may drive the Fed to raise rates faster than had been anticipated because of increased inflation.
The greenback also posted sharp gains against the yen, rising to a more than seven-month high, and climbed versus the euro to its highest since early December. The dollar rose more than 1% against the yen to 112.56 ahead of Thursday’s U.S. Thanksgiving holiday. It earlier hit a more than 7-month high of 112.97 yen. The euro, meanwhile, continued its descent, down 0.7% at $1.0551, after touching its lowest level for the year. The euro is facing a host of political risks in the coming months, including an Italian constitutional referendum in less than two weeks and French and German elections next year, that are seen as likely to drive the currency lower.
Sterling surged to a 10-week high against the euro and resisted the dramatic falls against the dollar suffered by other major currencies after a UK budget read as doing more than had been expected to bolster growth in years to come. At the heart of the sterling rally was a rocketing of long-dated gilt yields after finance minister Philip Hammond ramped up his forecasts for government borrowing to the tune of an extra 122 billion pounds ($151bn) over the next five years. That drove the pound almost 1% higher to 84.83 pence per euro, it’s the strongest since mid-September. At $1.2440 it was marginally higher against a dollar that gained 1.5% against the yen and almost 1% against the euro and a raft of other emerging and developed world currencies.
The Canadian dollar weakened against its U.S. counterpart on Wednesday as the greenback made broader gains against a basket of major currencies and oil fell. Oil declined on investors’ doubts that OPEC would agree a large enough production cut to significantly reduce the global crude surplus when it meets next week. The Loonie advanced 0.4% to $1.3491, weaker than Tuesday’s close of C$1.3453, or 74.33 U.S. cents.
The Australian and New Zealand dollars reversed the gains in the Asian trading session as US dollar strength added further momentum, despite rising equities and bubbly commodities underpinned sentiment for carry trades. The Aussie rose as high $0.7444 against the greenback before turning to close down 0.25% at 0.7379. The New Zealand dollar was down almost 1% at 0.7000, below the 200 DMA at 0.7029.
China’s offshore Yuan hit a record low above 6.94 per dollar on Wednesday as traders in Europe and North America grappled with a strengthening dollar and signs of accelerating capital outflows from the Asian state in the wake of Trump’s U.S. election win. The offshore Yuan fell almost half a% to 6.9441 per dollar as U.S. currency dealers arrived at their desks, with the currency on track for its heaviest monthly falls in 15 months. The more tightly controlled onshore rate for the Yuan was quoted at 6.9001 per dollar, its weakest since June 2008.
Latin American currencies weakened on Wednesday following strong U.S. economic figures and ahead of the U.S. Thanksgiving holiday. The Brazilian real weakened 1.1% to 3.38 to the U.S. dollar, falling more than its peers. Brazil’s central bank did not announce any market intervention for Wednesday after fully rolling over the $6.5 billion worth of currency swaps, which correspond to future dollar sales, maturing next month. The Mexican peso also fell 0.50% at 20.68.
South Africa’s rand fell as much as 1.7% against the dollar on Wednesday, as heightened bets on a U.S. interest rate hike next month lifted the greenback against emerging market currencies. The rand stumbled to a session low of 14.30/dollar, and is now expected to close 14.15, down 0.71% on the day.