The dollar index held above 109 on Tuesday, closing in on its highest level since September 2002, supported by safe haven flows and expectations that the Federal Reserve will move ahead with its aggressive tightening plan to bring inflation substantially lower. Last week, several US policymakers offered hawkish statements on the need for further tightening, driving a fresh rally in the dollar. Markets are currently leaning towards a higher chance of another 75 basis point rate increase in September. Traders are also bracing for Fed Chair Jerome Powell’s speech at the annual Jackson Hole symposium later this week that could signal how high US borrowing costs may go. The most pronounced buying activity was against the Euro and the Pound, as soaring natural gas prices increased Europe’s risk of recession.
