Dollar gains against euro amid inflation worries

The U.S. dollar traded near a 14-month high versus the euro on Thursday. Notably, a rise in energy prices raised the risk for the Fed to act sooner to normalize policy.

The greenback was at $1.15525 against the euro after increasing to $1.1529 on Wednesday for the first time since July 2020.

The dollar index was slightly changed at 94.252, following a nearly 0.5% rise over the past two sessions. That brought it back close to the one-year peak of 94.504 hit last week.

The safe-haven currency, the Japanese yen, was at 111.44 against the dollar. 

Additionally, crude oil surged to a seven-year peak before taking a breather from its recent torrid gains. Meanwhile, natural gas hit an all-time peak in Europe, while coal prices from major exporters also reached lifetime highs. 

The Federal Reserve has announced it’s likely to start reducing its monthly bond purchases in November. Before following up with interest rate increases. Fed says it could come next year.

Investors are now waiting for Friday’s non-farm payrolls report, which could provide additional hints to the timing of the Fed’s next moves. Remarkably, economists anticipate continued growth in the labor market, with a consensus forecast for 473,000 jobs to have been added in the previous month.

The world’s largest cryptocurrency hovered near a five-month peak of $55,800

According to Masayuki Kichikawa, a chief macro strategist at Sumitomo Mitsui Asset Management, the recent hawkish shift at the Federal Reserve, combined with the continued dovish stance of the ECB and Bank of Japan (BoE), should keep the greenback strong at least until the end of 2021.

He added that the U.S. dollar will also continue to benefit in its role as a safe haven, as high energy prices and concerns about a slowdown in China persist through 2021.

Furthermore, jitters about the U.S. debt ceiling – which had perversely supported the dollar – eased after the Senate nears to a temporary deal to avert a federal debt default in the next two weeks.

The Senate’s top Republican, Mitch McConnell, proposed that his party would extend the federal debt ceiling into December.

In cryptocurrencies, bitcoin, the world’s largest cryptocurrency by market cap, hovered near a five-month peak of $55,800 hit on Wednesday. It was last trading at $54,776.