The dollar index rose above the 104 mark on Monday, hitting a fresh 20-year high, as expectations of further Federal Reserve monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety of the dollar. Uncertainties surrounding the outlook for inflation, the war in Ukraine and Chinese lockdowns were among the factors that spurred safe-haven demand for the dollar.
Meanwhile, the Fed raised its benchmark funds rate by 50 basis points last week and a strong jobs report reinforced bets on further big hikes. Investors now look ahead to fresh inflation data due on Wednesday to gain insight on the central bank’s possible next steps. Futures markets are pricing a 75% of a 75 basis point rate increase at the Fed’s next meeting in June and more than 200 basis points of tightening by year-end.
