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Dollar Climbs To Fresh 2-year High As Traders Bet On Aggressive Rate Hikes

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The U.S. dollar firmed against its major counterparts on Friday and the dollar index rose to a fresh 2-year high, buoyed by hawkish remarks from a Federal Reserve policy maker supporting aggressive interest rate hikes to counter inflation.

St Louis Fed President James Bullard said on Thursday that the central bank remained “behind the curve” on interest rates and preferred to raise the federal funds rate by another 3 percentage points by the end of the year.

Chicago Fed President Charles Evans and his Atlanta counterpart Raphael Bostic said that it is appropriate to raise rates to neutral but in a measured manner.

Earlier in the week, the Fed minutes suggested that it plans to start the balance sheet reduction next month and favored a half-point liftoff in interest rates at one or more meetings in the future.

According to the CME Group’s FedWatch Tool, investors are pricing in the Fed to raise interest rate to a target range of between 2.5 percent and 2.75 percent by the end of the year.

Data released by the Commerce Department showed wholesale inventories in the U.S. surged by more than expected in the month of February, spiking by 2.5%, after jumping by an upwardly revised 1.2% in January.

Economists had expected wholesale inventories to shoot up by 2.1% compared to the 0.8% increase originally reported for the previous month.

Next week, traders are likely to keep a close eye on reports on consumer and producer price inflation, retail sales and industrial production.

The data may impact the outlook for interest rates amid recent indications the Federal Reserve plans to tighten monetary policy more aggressively than previously anticipated.

The dollar index climbed to a fresh 2-year high of 100.19, but pared gains subsequently, and was last seen at 99.85, up 0.1% from the previous close.

Against the Euro, the dollar firmed to $1.0876, after having weakened to $1.0893.

The Dollar is trading at $1.3033 against Pound Sterling, after having firmed to $1.2982 in early New York session.

Against the Japanese currency, the dollar is stronger, fetching 124.31 yen. It had earlier strengthened to 124.68 yen.

Against the Aussie, the dollar is at 0.7460, gaining from 0.7479.

The Swiss franc is down slightly against the dollar, at CHF 0.9341, while the Loonie is stronger at C$1.2574 a dollar thanks to the surge in crude oil prices.

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