Dollar rises ahead of an expected sharp rise in US interest rates

The US dollar rose close to its highest level in 20 years against other major currencies in trading on Monday, ahead of a large number of central bank meetings, including a meeting of the US Federal Reserve, which is likely to approve another major interest rate hike.

Exchanges were generally weak, with markets in London and Tokyo closed for public holidays. However, the dollar remained strong on expectations that the US Federal Reserve will stick to the path of aggressive interest rate hikes to contain high inflation.

The dollar index – which measures the performance of the US currency against 6 competing currencies – rose 0.4% to 110.06 points, heading to a 20-year high of 110.79, which it recorded on the seventh of this September. Markets expect a US interest rate hike of 75 basis points this week, with less chance of a 100 basis point increase.

The euro fell 0.4% to $0.9972, and the pound sterling fell 0.3% to $ 1.1390, and remained close to its lowest level in 37 years recorded on Friday, while both the New Zealand dollar and its Australian counterpart fell by more than 0.5%.Markets are divided over whether the BoE will raise rates by 50bp or 75bp on Thursday.

The Canadian dollar fell, in early European trading, to its lowest level in almost two years at 1.3311 against the US dollar. The dollar rose 0.4% to 143.46 yen, hovering below the strong resistance level at 145 which was boosted by hawkish Japanese policy makers’ talk of currency intervention.

The Chinese currency remained weak at around 7 yuan against the dollar, while economic concerns loomed and the possibility of further cuts in benchmark interest rates loomed on Tuesday. Bitcoin – the largest cryptocurrency, by market capitalization – fell to a 3-month low below $19,000, as concern about rising interest rates globally hurt risky assets.