Last Week Saw Dollar In Demand Amidst Fed's Higher-for-longer Rate Stance

(RTTNews) - The U.S. Dollar extended gains during the week ended September 29 as markets digested the Fed's higher-for-longer interest rate outlook. The Dollar rallied against the euro, the pound, the Australian Dollar, as well as the Japanese Yen in a week that was also marked by rising bond yields, surging crude oil prices, plunging gold prices and anxiety ahead of a widely feared federal Govt shutdown.

The Dollar Index, a measure of the Dollar's strength against a basket of 6 currencies, gained 0.61 percent in the past week, rising to 106.22 from 105.58 a week earlier. The week's trading range was between the low of 105.52 recorded on Monday and the 10-month high of 106.84 touched on Wednesday. The Dollar's strength coincided with yields on U.S. 10-year bonds rising to a 16-year high of 4.688 on Thursday. Hawkish Fed rhetoric that came amidst indications of a strong economy, low unemployment rates and persistent inflation, helped push yields northward to multi-year highs.

The Euro declined 0.77 percent against the U.S. Dollar, amidst lower-than-expected inflation readings from the region that reduced the likelihood of an aggressive stance by the ECB. Business Climate and Consumer Confidence indicators from the region also portended a lower headroom available for the ECB to raise rates further. The EUR/USD pair dropped to 1.0570, from 1.0652 a week earlier. The pair dropped from the high of 1.0656 recorded on Monday to an almost 9-month low of 1.0488 on Wednesday but recovered slightly before the end of the week. The pound weakened against the U.S. Dollar as the Bank of England's surprisingly dovish stance contrasted with the hawkish commentary from Fed officials. The GBP/USD pair which had closed at 1.2238 on September 22, dropped to 1.2197 by September 29, implying a weekly loss of around 0.34 percent. The week's trading range was between the six-month low of 1.211 on Wednesday and the weekly high of 1.2273 touched on Friday.

The Australian Dollar edged lower around 0.11 percent against the U.S. Dollar amidst concerns about China's property sector as well as overall economic growth. The AUD/ USD pair closed at 0.6434 on September 29, versus 0.6441 a week earlier. The pair ranged between low of 0.6331 on Wednesday and the high of 0.6503 on Friday. The Reserve Bank of Australia's interest rate decision is due late on Monday.

The Japanese yen which had weakened following Bank of Japan's decision to keep interest rates in negative territory extended losses. The USD/JPY pair's 11-month high of 149.74 touched on Wednesday triggered speculation about govt intervention to defend the yen. The pair which had closed at 148.37 on September 22 had briefly fallen to 148.25 on Monday before reversing course. The pair increased 0.66 percent during the week, closing at 149.35.

The Dollar rebounded on Monday as markets digested the Fed's higher-for-longer interest rate outlook. The DXY has increased to 106.59. Amidst the Dollar's rebound, the EUR/USD pair has fallen to 1.0526 whereas the GBP/USD pair has dropped to 1.2145. The AUD/USD pair has also declined to 0.6385. The USD/JPY pair is hovering close to 149.80.