(Updated at 1000 EDT)
The dollar rose against the euro on Wednesday before several Federal Reserve officials were due to speak and as investors watched the war between Hamas and Israel for signs of escalation.
The currency has benefited from expectations the U.S. central bank will hold rates higher for longer as it battles to bring inflation closer to its 2% annual target.
“Largely I think we’re still basing currency movements on interest rates,” and the Fed’s “very determined attempt to keep interest rates high to fight inflation,” said Joseph Trevisani, senior analyst at FXStreet.com in New York.
Since mid-July, the benchmark 10-year Treasury yield US10YT=RR has climbed about 100 basis points and the dollar index has risen around 7%.
Fed funds futures traders are pricing in a 40% chance that the Fed could hike rates again by year-end, but only 11% odds of an increase next month, according to the CME Group's FedWatch Tool.
Minneapolis Fed President Neel Kashkari on Tuesday said it has taken much longer than expected for inflation to come down, and it is "still too high."
The Fed should extend its pause on interest rate increases because of growing evidence that higher borrowing costs will slow the economy, Philadelphia Fed president Patrick Harker said.
Other regional Fed presidents are due to give comments on Wednesday, before Fed Chaiman Jerome Powell is also scheduled to speak on Thursday.
FED/DIARY Fed officials will enter into a blackout period on Oct. 21 before the central bank's Oct. 31–Nov. 1 meeting.
The dollar index =USD was last up 0.15% on the day at 106.37. It is holding below the 107.34 level reached on Oct. 3, the highest since November 2022.
The euro EUR=EBS dipped 0.23% to $1.0552. It is up from $1.0448 on Oct. 3, the lowest since December 2022.
The dollar is also benefiting from safe haven demand on concerns over the conflict in the Middle East.
U.S. President Joe Biden arrived in Israel on Wednesday pledging solidarity in its war against Hamas and saying that a blast that killed huge numbers of Palestinians at a Gaza hospital appeared to have been caused not by Israel but by its foes.
The Chinese yuan briefly jumped after official data showed China's economy grew at a faster-than-expected clip in the third quarter, while consumption and industrial activity in September also surprised on the upside.
The yuan CNY=CFXS hit a one-week high of 7.2905 per dollar, though it then retreated to 7.316. The China-sensitive Australian AUD=D3 and New Zealand dollars NZD=D3 both jumped before unwinding their gains.
Sterling fell after a brief pop as British consumer price inflation (CPI) unexpectedly held at 6.7% in September, remaining the highest of any major advanced economy and keeping alive the possibility of another rise in interest rates.
The pound GBP=D3 was last down 0.13% at $1.2168. The yen JPY=EBS was last up slightly at 149.70 to the dollar. The Bank of Japan on Wednesday unexpectedly announced $2 billion in bond-buying to keep downward pressure on yields.
The 150 yen mark has become a psychological level after past government interventions to prop up the currency occurred around that point. Earlier in October the yen rallied sharply after falling past 150, although it later fell back and early indications suggest Japan did not intervene.
======================================================== Currency bid prices at 10:00AM (1400 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 106.3700 106.2200 +0.15% 2.783% +106.4000 +106.0100 Euro/Dollar EUR=EBS $1.0552 $1.0576 -0.23% -1.52% +$1.0594 +$1.0549 Dollar/Yen JPY=EBS 149.7000 149.8000 -0.07% +14.18% +149.8300 +149.4900 Euro/Yen EURJPY= 157.96 158.44 -0.30% +12.59% +158.5400 +157.9300 Dollar/Swiss CHF=EBS 0.8968 0.9005 -0.38% -2.98% +0.9009 +0.8963 Sterling/Dollar GBP=D3 $1.2168 $1.2184 -0.13% +0.62% +$1.2211 +$1.2160 Dollar/Canadian CAD=D3 1.3670 1.3648 +0.16% +0.90% +1.3672 +1.3617 Aussie/Dollar AUD=D3 $0.6356 $0.6366 -0.15% -6.75% +$0.6393 +$0.6352 Euro/Swiss EURCHF= 0.9462 0.9519 -0.60% -4.38% +0.9523 +0.9461 Euro/Sterling EURGBP= 0.8670 0.8681 -0.13% -1.97% +0.8688 +0.8661 NZ NZD=D3 $0.5878 $0.5897 -0.30% -7.41% +$0.5919 +$0.5879 Dollar/DollarDollar/Norway NOK=D3 11.0070 10.9600 +0.41% +12.14% +11.0170 +10.9380 Euro/Norway EURNOK= 11.6173 11.5781 +0.34% +10.71% +11.6286 +11.5650 Dollar/Sweden SEK= 10.9844 10.9044 +0.43% +5.54% +10.9951 +10.8991 Euro/Sweden EURSEK= 11.5881 11.5385 +0.43% +3.93% +11.6015 +11.5393
