The dollar keeps rising while tensions in Ukraine grow

The dollar rose to a two-week high against a basket of major currencies on Monday. Investors sought haven assets following hawkish comments from Federal Reserve officials. Fed raised concerns about an escalation in the Ukraine crisis.

The dollar index, which measures the greenback against a basket of six major peers, was up 0.4% at 95.842 close in New York. It arrived at this point after hitting a two-week high of 95.946. The index had risen as much as 1.3% earlier in the session.

The hawkish comments from Fed officials last week have also stimulated demand for the dollar. Investors had expectations the Fed would tighten monetary policy further this year.
The Aussie dollar rose briefly. Australia’s consumer price index rose 0.3%, the highest in five months. It is a bit above the analyst consensus of a 0.2% rise. It’s likely to support the case for a Reserve Bank of Australia rate hike this year.

Predictions on the Dollar movement

The RBA has kept its cash rate at a historically low level of 1.5%. But it said it would raise rates if inflation pressures build. The Australian dollar was up slightly at $0.7350 in early trade but slightly down at $0.7357 in late trade.

The Federal Reserve will begin a two-day policy meeting later in the global day. Investors are hopeful for any hints on the timing and pace of future rate hikes. They expect the Fed to raise rates another quarter-point at the meeting. It would bring the benchmark rate to a range of 2.00%-2.25%.

If the Fed follows its plans, the next rate hike could come as soon as June. When the central bank has scheduled to release its Beige Book, it will happen.

The Fed has raised rates three times this year, and it might continue making gradual adjustments to its policy stance. It aims to keep the economy on track toward the Fed’s goals of maximum employment and 2% inflation.

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