scorecardThe dollar jumps to a fresh high for 2023 as investors bet the Fed's inflation fight is nowhere near over
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The dollar jumps to a fresh high for 2023 as investors bet the Fed's inflation fight is nowhere near over

George Glover   

The dollar jumps to a fresh high for 2023 as investors bet the Fed's inflation fight is nowhere near over
Investment1 min read
  • A gauge of dollar strength climbed to a new high for 2023 Monday.
  • Traders are betting that the Federal Reserve will have to keep interest rates at a higher level for longer to crush inflation.

The dollar rose to a new high for the year against its rivals Monday, with the greenback powered higher by investors' bets that the Federal Reserve is nowhere near winding down its battle against inflation.

The US Dollar Index – which measures the strength of the buck against six alternative currencies, including the euro and the Japanese yen – climbed 0.4% over the course of the trading session to surpass its previous 2023 high, set back in March.

The widely-followed gauge is now on a 10-week winning streak, according to data from Saxo Bank.

Investors' belief that the Fed will hold interest rates at a higher level for longer in a bid to crush stickier-than-expected inflation has powered the dollar's gains over the past two-and-a-half months.

Last week, chair Jerome Powell said the central bank now plans to "proceed carefully" in its battle against soaring prices, but signaled it could tighten again and is unlikely to start slashing borrowing costs until well into 2024.

When interest rates are high, the dollar tends to strengthen as it becomes more attractive to foreign investors seeking juicier yields.

"The dollar is back in powerlifting mode as expectations that interest rates will be kept elevated for longer in the face of stubborn inflation have pushed the greenback to levels not seen since March," Hargreaves Lansdown's head of money and markets Susannah Streeter said Monday.




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