The dollar index (DXY00) extended this week’s rally on Thursday to a 1.75-month high and finished up by +0.14%. The dollar was supported by a jump in the 10-year T-note yield on Thursday to a 19-year high of 5.18%, strengthening the dollar’s interest rate differentials. The dollar also rose Thursday on signs of strength in the US economy after weekly jobless claims unexpectedly fell to a 2-month low, and after Aug new home sales rose more than expected to an 8-month high. Also, hawkish Fed comments supported the dollar on Thursday after New York Fed President John Williams said the Fed has a lot of work to do to contain inflation, and Philadelphia Fed President Anna Paulson said some modest further tightening of monetary policy may be warranted, signaling support for additional Fed rate hikes. In addition, Thursday’s +2% rally in WTI crude oil raises inflation expectations and could persuade the Fed to tighten monetary policy further, a bullish factor for the dollar.
US weekly initial unemployment claims unexpectedly fell -1,000 to a 2-month low of 197,000, showing a stronger labor market than expectations of an increase to 200,000.
