FOREX-Dollar advances to one-year high; U.S. debt ceiling impact muted

Dollar rises vs yen to highest since February 2020 Euro falls to lowest since late July 2020 U.S. govt shutdown looms as debt ceiling impasse unresolved Global central bankers keeping an eye on inflation (Adds new comment, central bankers’ comments, latest on debt ceiling talks, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, Sept 29 (Reuters)

The dollar surged on Wednesday to a one-year high against major currencies, boosted by increased expectations for a reduction in the U.S. Federal Reserve’s asset purchases starting in November and an interest rate hike, possibly in late 2022. The greenback also fared well despite an impasse in Washington over the U.S. debt ceiling that threatened to plunge the government into a shutdown.

The world’s largest reserve currency, seen as a safe-haven bet at times of market stress, has strengthened in recent days as investors instead focused on fears of a global slowdown, a rise in energy prices and higher U.S. Treasury yields. Traders are also concerned the Fed will start to withdraw policy support just as global growth slows.

“Fed has sounded the starting gun on monetary policy normalization,” wrote Kit Juckes, macro strategist, at Societe Generale in his latest research note. “As the U.S. escapes the interest rate zero-bound, leaving the Eurozone and Japan behind, the global savings glut is set to be drawn towards the dollar, which can outperform the majority of other currencies in the coming year, and may start its move earlier than we expected,” he added.