The dollar notched its largest two-day gain of the year after US central bank officials brought forward the anticipated timing of the Federal Reserve’s first post-pandemic interest rate rise.
The dollar index, which measures its value against a basket of other big currencies, jumped 0.87 per cent on Thursday after gaining almost 0.6 per cent in the previous session. The euro lost 0.77 per cent against the dollar, taking it to $1.19 and taking the US currency’s gain over its eurozone counterpart to 1.8 per cent over two trading sessions.
The Fed said on Wednesday that most of its officials expected a rate rise in 2023, against earlier predictions of 2024, as the US economy recovered strongly from the pandemic and consumer price inflation hit an annual rate of 5 per cent in May. Fed chair Jay Powell also said officials were “talking about talking about” reducing the Fed’s $120bn-a-month asset purchases, which have boosted financial markets since March 2020.