The U.S. Dollar kicked-off the fourth quarter near its year-highs, heading towards its best week since June as investors eyed a hawkish stance from the Federal Reserve of a rate hike earlier than major peers.
The Dollar also gained support from Covid-fuelled market sentiment caution, China’s growth trembles, and the upcoming deadline to lift the U.S. government’s borrowing limit, Reuters reports.
At the time of writing the Dollar index stood at 94.287, following a 1.1% gain up to now this week, the largest weekly increase since June.
Elsewhere the Euro remained steady on Friday at $1.1578, after a 1.3% decline this week through key support around $1.16 to drop to its lowest point since July last year.
The Yen enjoyed an overnight rally from a 19-month low on Friday, but lost 0.6% for the week, last trading at 111.21 per Dollar.
In addition, benchmark 10-Year Treasury yields rose for the sixth consecutive week, whilst real 10-year yields are rising faster than European counterparts.
“As long as markets remain confident that the U.S. is going to start tightening monetary policy within a reasonable timeframe, the Dollar should remain well,” stated Societe Generale strategist Kit Juckes.
“The prospect of the European Central Bank keeping rates below zero while the Fed hikes should keep Euro/Dollar in the post-2014 range, with a centre of gravity around $1.12-1.16,” he added.
Moreover, the Australian Dollar dropped 0.3% to $0.7203, after falling 3.6% in Q3 – the worst performance of any G10 currency against the Dollar. The New Zealand dollar also fell 0.2% to $0.6882.
In addition, the Pound underperformed in Q3, falling 2.5%, impacted by fears of hawkish noise from the central bank, despite mounting supply chain issues.
Sterling fell 0.2% to trade just over a nine-month low of $1.3452.