Dollar index hits seven-week high

The dollar index rose to its highest level in nearly seven weeks, a day after it reached minutes from the Federal Reserve’s last policy meeting, which supported but did not add to the market’s view that the central bank will raise rates further.

The index, which tracks the benchmark against six major peers, hit 104.69, its highest since Jan. 6, in late morning Europe, before trading only steadily below that level today.

The euro, the index’s largest component, briefly touched $1.0587, also its lowest since early January. On Wednesday, the dollar index rose 0.37% from January 31 to February 1. A meeting of the Federal Open Market Committee (FOMC) showed that almost all policymakers supported slowing the pace of interest rate increases. However, they also indicated that containing unacceptably high inflation would be a “key factor” in how much further rate hikes are needed.

The minutes meeting finally happened

The minutes meeting had a muted impact. The meeting came ahead of a series of indicators released in February, notably jobs data, which showed the US economy is doing well, leaving the Fed with more room to raise rates to curb inflation.

Traders in futures tied to the Federal Reserve’s policy rate largely held the view that the central bank would continue to raise rates by a quarter point at its next three meetings.

The recent increase in those expectations has led to a steady rise in the dollar index from 100.8 in early February. But it is still well off a 20-year peak of 114.78 last October — a time of fears for the health of the global economy and when the Federal Reserve raised rates more aggressively.

Elsewhere, sterling was at $1.029; the Swiss franc was also slightly softer at $0.9318.

On Friday and next Monday, investors will be looking for clues from incoming Bank of Japan Governor Kazuo Ueda on how soon the BOJ will stop controlling bond yields.