Dollar rises further, pins euro and yen to multi-decade lows

The dollar resumed its relentless rise on Thursday, hitting new 24-year highs against the yen and pegging the euro close to parity, as investors bet the Federal Reserve would raise interest rates to combat runaway inflation.

The global economic turmoil has put a rocket under the safe-haven dollar, pushing the dollar index that tracks the greenback against six counterparts by more than 13% this year. It was last up 0.3% on the day at 108.580 =USD.

The dollar strengthened more than 1% against the yen, pushing it above 139 yen per dollar for the first time since 1998. The last time it rose was 1.1% to 138.92 yen. JPY=EBS

The euro was trading just above parity with the dollar, a day after breaking below the key level for the first time in nearly two decades.

The single currency remained under pressure on Thursday, weighed down by lowered official economic forecasts for the euro zone and political unrest in Italy.

The euro fell as much as 0.5% on the day and was down 0.4% at $1.00215.

Another hot set of US inflation data on Wednesday and an aggressive 100 basis point rate hike by the Bank of Canada the same day have stoked bets on faster policy tightening by the Fed, currency analysts said.

“The price action reflects growing fears that the Fed will throttle the US recovery by responding more aggressively to dampen upside inflation risks,” analysts at MUFG said in a note.

Traders have raised bets that the US central bank could raise rates by 100 basis points when it meets on July 26-27. An increase of at least 75 basis points is considered almost certain. FEDWATCH

Sterling fell 0.4% to $1.18505 as concerns over the outlook for the British economy dominated despite data on Wednesday showing output unexpectedly grew in May. GBP=D3

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