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Dollar Continues To Climb Higher, Hits Near 20-year High

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The U.S. dollar moved higher against its major peers on Thursday, extending recent gains amid rising prospects of sharp interest rate hikes by the Federal Reserve in the coming months.

Rising yields on U.S. 10-year Treasury note contributed as well to the dollar’s uptick. The yield on 10-year bonds rose to 2.88% before dropping a bit to around 2.86%.

The Fed, which is looking to rein in inflation, is widely expected to raise rates by 50 basis points at each of the next three meetings.

Fed Chairman Jerome Powell recently said that a 50 basis point hike would be on the table at the meeting in May.

Data released by the Commerce Department this morning showed U.S. economic activity unexpectedly contracted in the first quarter of 2022. The report said real gross domestic product declined by 1.4% in the first quarter after spiking by 6.9% in the fourth quarter of 2021. The pullback surprised economists, who had expected GDP to increase by 1.1%.

The Commerce Department said the unexpected drop in GDP reflected decreases in private inventory investment, exports, and government spending along with an increase in imports, which are a subtraction in the calculation of GDP

According to the report released by the Labor Department, first-time claims for U.S. unemployment benefits edged slightly lower in the week ended April 23rd, dipping to 180,000, a decrease of 5,000 from the previous week’s revised level of 185,000.

Economists had expected jobless claims to slip to 180,000 from the 184,000 originally reported for the previous week.

The dollar index climbed to 103.93, a level last seen in December 2002, before paring some gains. Still, at 103.63, the index was up nearly 0.7% a little while ago.

Against the Euro, the dollar firmed to $1.0508 from $1.0560. The dollar is trading at $1.2468 against Pound Sterling, strengthening from $1.2544.

The Japanese currency is down as well against the dollar, dropping to 130.79 yen a dollar, from Wednesday’s close of 128.42 yen.

Against the Aussie, the dollar is stronger at 0.7102, gaining from 0.7127.

The Swiss franc has weakened to 0.9716 a dollar from 0.9692, while the Loonie has firmed to 1.2800 a dollar, from 1.2821 after oil prices climbed higher on supply concerns.

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