The dollar index traded at a two-decade high on Thursday and climbed to its highest level in 24 years against the yen, a currency sensitive to interest rate movements, after strong economic data in United States that gave more arguments for an aggressive monetary stance by the Federal Reserve.
* The US currency strengthened after a government report showed the number of Americans filing new claims for jobless benefits fell further last week, in line with strong demand for workers and tight labor market conditions.
* The report also said layoffs fell in August, despite the Fed’s sharp interest rate hikes to quell inflation, which have raised the risk of a recession.
* Meanwhile, data from the Institute of Supply Management (ISM) showed that manufacturing in the United States grew steadily in August, as employment and new orders recovered, while a further easing in the pressures of the prices strengthened expectations that inflation has probably peaked.
* “There are no signs of a significant slowdown in these numbers,” Shaun Osborne, chief currency strategist at Scotiabank, said after the ISM data. “That may tip expectations toward a slightly more aggressive Fed,” he said.
* The dollar index, which measures the greenback against a basket of six currency pairs, was up 0.77% at 109.700 at 1533 GMT, very close to its highest level since June 2002.
* Expectations of a third 75bp rate hike in the US at this month’s Fed meeting are rising on recent strong economic data and Fed funds futures now point to a 77 chance, 1%.
* All eyes will now be on the US Non-Farm Payrolls report for August due out on Friday.
* The euro fell 1.24%, trading below parity against the dollar at $0.9931, while sterling hit a fresh two-and-a-half-year low of $1.1522.
* The Japanese yen fell as low as 140.225 yen per dollar, a low not seen since 1998. The dollar added 0.71% to 139.94 yen.