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US Dollar: Hawkish Fed supports Dollar against Euro
Confirmed
In Short: The US Dollar gained ground following the Federal Reserve's hawkish rate hike, while the Japanese Yen weakened amid expectations of further US monetary tightening.
Danske Bank's research team noted that the Dollar strengthened after the Fed's 25bp rate hike, emphasizing upside inflation risks and reinforcing the perception of resilient US growth.
Markets also pushed the Dollar higher alongside rising short-term US Treasury yields, with strong August retail sales data further supporting the US Dollar's rally to its highest level since late July.
The US Dollar paused its rally, however, as the Australian Dollar found fresh buyers, supported by hopes for a Reserve Bank of Australia rate hike and US-Iran diplomatic efforts.
The Japanese Yen weakened significantly after the Federal Reserve's hawkish hike, with strategists warning that the currency could weaken further unless the Bank of Japan convinces markets of more tightening measures.
Background
Danske Bank A/S is a Danish multinational banking and financial services corporation. Headquartered in Copenhagen, it is the largest bank in Denmark and a major retail bank in the northern European region with over 5 million retail customers.
What's confirmed
- Danske Bank's research team noted that the Dollar strengthened after the Fed's 25bp rate hike, emphasizing upside inflation risks and reinforcing the perception of resilient US growth.
- Markets also pushed the Dollar higher alongside rising short-term US Treasury yields, with strong August retail sales data further supporting the US Dollar's rally to its highest level since late July.
- The US Dollar paused its rally, however, as the Australian Dollar found fresh buyers, supported by hopes for a Reserve Bank of Australia rate hike and US-Iran diplomatic efforts.
- The Japanese Yen weakened significantly after the Federal Reserve's hawkish hike, with strategists warning that the currency could weaken further unless the Bank of Japan convinces markets of more tightening measures.
What's still developing
- Similarly, US rates rose significantly across the curve with 2Y USD swap rates rising 10bp and 10Y USD swap rates rising 6bp following the decision." "EUR/USD moved modestly lower, consistent with the hawkish interpretation.
- The US Dollar pauses following the post-Fed rally to seven-week highs, while a more hawkish repricing of the BoJ's policy normalization path supports the Japanese Yen.
- The yen weakened as much as 1% overnight to 156.42 per dollar in the wake of the Fed move.