Dollar sails at two-decade high as Putin rattles markets before Fed

LONDON, Sept 21 (Reuters) – The dollar jumped to a fresh two-decade high on Wednesday, as a decision by Russian President Vladimir Putin to mobilize more troops for the conflict in Ukraine markets expected close to another aggressive rate hike by the US Federal Reserve rocked .

Calling on 300,000 reservists to fight in Ukraine on Wednesday, Putin said Moscow would respond with the might of its entire arsenal if the West continued what he called its “nuclear blackmail” over the conflict there. Continue reading

The news pushed the dollar index, which measures the value of the greenback against other major currencies, by more than 0.5% to 110.87 – its highest level since 2002.

It last traded at 110.62, up about 0.4% on the day.

Dollar index ahead of Fed at two-decade high

Dollar index ahead of Fed at two-decade high

European currencies bore the brunt of selling in the currency markets as Putin’s comments heightened concerns about the economic outlook for a region already badly hit by Russia’s choke on gas supplies to Europe.

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The euro fell to a two-week low of $0.9885, in sight of two-decade lows set earlier this month. It was last down 0.4% to $0.9930.

Sterling, down 0.3%, fell to a fresh 37-year low of $1.1304.

“The Russia headlines steal the thunder from the Fed, at least for now,” said Kenneth Broux, currency strategist at Societe Generale.

“Concerns about an escalation of the conflict are hurting European currencies. And if the Fed is also hawkish tonight then you could see the losses snowball.”

Later Wednesday, the Fed is expected to raise interest rates by three-quarters of a percentage point for the third straight month, signaling how much further and how fast borrowing costs need to rise to tame inflation. Continue reading

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The policy decision, due around 1800 GMT, will mark the latest step in a synchronized policy shift by global central banks that will test the resilience of the global economy and countries’ ability to deal with exchange rate shocks as the dollar strengthens.

The dollar index is up nearly 16% this year and is poised for its biggest annual rise since 1981.

Meanwhile, the Australian and New Zealand dollars hit multi-year lows. The Aussie hit a low of $0.6655, its lowest since June 2020, while the Kiwi fell to $0.5877, its lowest since April 2020.

Against the battered yen, the dollar rose just 0.12% to 143.89, holding on to recent 24-year highs

“What was interesting to me was that the dollar/yen slumped on news of the announcement, possibly signaling a return of the yen’s safe-haven references, which were absent for much of the year,” said Colin Asher, Sr Economist at Mizuho Corporate Bank.

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Reporting by Dhara Ranasinghe; additional reporting by Lucy Raitano; Adaptation by Edwina Gibbs and Catherine Evans

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