The dollar gained against the major currencies on Thursday as markets settled in on the notion there is no alternative to the U.S. currency's relatively high interest rates and the safety and liquidity of U.S. markets, even as the aggressiveness of further Fed tightening has become more data-dependent.
The dollar index broke out above prior August highs by the 50% Fibo of the correction that followed the July Fed meeting nL1N2ZU15X with a nudge from better-than-expected U.S. jobless claims nL1N2ZT1TG and Philly Fed nAQN1M2MHO data.
The dollar shook off the initial dovish interpretation of Wednesday's Fed minutes nL1N2ZT0WB and another dreary U.S. housing report nL1N2ZU0VJ.
Comments from regional Fed presidents left the impression that the U.S. central bank would increase rates to about 3.5% by year-end, while monitoring economic data, sentiment and market indicators of inflation to adjust the pace of tightening nL1N2ZU125nFWN2ZU59YnS0N2OC024nS0N2YH09A.
The dollar also ignored the fall in Treasury yields falling versus slightly higher bund and gilt yields, due to demand for the U.S. currency as a safe haven, not just as a carry trade.
The U.S. economy remains relative insulated from Russia's war against Ukraine and Europe's energy crisis.
Natural gas prices on the continent are 7.3 times the price in the U.S., versus pre-pandemic ratios closer to 2.
Shelling in the vicinity of the Zaporizhzhia nuclear plant, the largest plant in Europe, added another geopolitical concern nL1N2ZT2GN.
EUR/USD fell roughly 1%, with the focus back on parity and July's 0.9952 trough.
Sterling was also down 1%, with the 76.4% Fibo of the July-August rebound and July 21 swing low at 1.1891/96 the last props before July's 1.1761 nadir.
USD/JPY gained 0.57% to make new August highs past the 30-day moving average and Wednesday's 135.50 highs, eyeing the 61.8% Fibo of the July-August drop at 135.95 and option expiries at 136.
The haven yen gained ground on the euro and sterling but couldn't beat the demand for the dollar.
Soaring oil prices on supply concerns and a rate hike from Norway's central bank helped the krone eke out a gain against the otherwise broadly strong dollar.
Bitcoin was relatively flat, but lost some ground to ether.
There are no U.S. releases Friday or Monday.
Wednesday features global August PMI readings and new U.S. home sales, though the Fed's three-day Jackson Hole symposium that starts on Thursday will likely be the week's main event.
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