Dollar perched at two-month high as hot PMI fuels inflation fears, rate hike bets

According to Business Recorder, the US dollar held close to a two-month peak on Thursday, supported by a stronger-than-expected manufacturing survey that revived worries about rising prices. A weak auction of five-year Treasury notes pushed yields higher, with the five-year rate climbing above 5%, a threshold it had not crossed since 2007. The euro slipped to $1.1378, a two-month low, while sterling traded near a three-month low at $1.3231.

CME Group's FedWatch Tool now puts the chance of another Federal Reserve rate increase in October near 70%, compared with 50% a week earlier. Fed Governor Michael Barr said on Wednesday that more increases are likely and markets took his remarks as forward guidance. Oil climbed almost 4% on Wednesday, with Iran's president rejecting any surrender and markets also weighing a US diesel export ban, adding to inflation concerns.

The yen hovered near a three-week low at 157.9 as traders prepared for possible intervention. Markets viewed the Bank of Japan's rate increase last week, which lifted rates to a 31-year high, as not hawkish enough. The Australian dollar was down 0.07% at $0.7035 ahead of jobs data, and the kiwi was flat at $0.5676. The offshore yuan held flat at 6.7119 per dollar while markets followed Chinese President Xi Jinping's US trip, his first in three years, a meeting expected to test relations.