Dollar Rises to Eight-Week High on Fed Rate Hike Expectations

The dollar has risen to its highest level since the end of July against a basket of currencies, as the market bets on further interest rate hikes by the Federal Reserve. Last week, the Fed raised rates by 25 basis points and indicated that there would be at least one more hike this year. As expectations for rate increases heat up, the dollar has gained support. During the European afternoon trading session, rising energy prices also boosted the dollar, with Brent crude oil prices climbing back above $100 a barrel. The dollar's safe-haven attributes and the U.S. position as a net exporter of oil typically mean that rising energy prices are beneficial for the dollar; however, as interest rate expectations become the dominant factor, the dollar's sensitivity to oil price fluctuations has decreased. Standard Chartered strategist Steve Englander noted that the trend of a stronger dollar in the medium to long term may begin to emerge.

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