Hawkish Fed & China risks point to a stronger dollar

In a choppy week dominated by some surprising central bank announcements and the ongoing uncertainty around China’s property sector, the US dollar continued to make some headway, especially against emerging market currencies. The FOMC delivered another hawkish message, signalling that a taper announcement is imminent and shifting its “dot plot” policy rate projections higher again. Although the dollar has not soared in the way that it did following the June FOMC meeting, US bond yields have risen sharply. We continue to think that a renewed widening of bond yield gaps in favour of the US will drive the dollar higher before long.
Jonas Goltermann Senior Markets Economist
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