The dollar index hovered fresh 16-month highs above 96.5 on Tuesday, lifted by the reappointment of Federal Reserve chairman Jerome Powell which bolstered bets for higher interest rates. Meanwhile, Lael Brainard, who was the other leading candidate and widely considered to be more dovish of the two, will be Fed vice chair.
The news somewhat removed policy uncertainty as outlook for US rates grew increasingly hawkish, with at least three Fed officials having openly discussed speeding up of stimulus tapering. The dollar was also buoyed by a jump in bond yields, with the US Treasury yield bouncing back above 1.6%, along with its safe-haven status amid surging COVID-19 cases and reimposition of lockdowns in Europe.
