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Dollar Escalates as Fed Waller Pushes Back on Dovish Rate Bets


(Bloomberg) – The dollar rose against most major currencies on Monday after Federal Reserve Governor Christoper Waller pushed back against bets the US Central Bank is nearing the end of its bull cycle.

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The yen fell as much as 0.8% while the Aussie fell 0.3% against the greenback after Waller said the US central bank has a way to go before it stops rising. Waller also said the market had “an exit ahead” of the unexpected cooling of inflation.

Jason Wong, strategist at Bank of New Zealand in Wellington, said the market’s reaction to Waller’s hawkish comments was “a reminder the Fed won’t change its stance on a good CPI outcome.” “.

The greenback’s rally came after the dollar fell 3.5% last week, its biggest drop since the early days of the pandemic as traders reduced bets on strong Fed rallies after US inflation slowed more than expected. Treasury yields also fell and stocks rose on hopes the Fed won’t need to raise rates as much as anticipated.

Commonwealth Bank of Australia strategists wrote in a note to clients that the dollar could cushion last week’s losses somewhat as they are out of proportion to the scale of inflationary slippage. Fed speakers this week are likely to push back against the market reaction because they want to tighten financial conditions, not ease them, they said.

Investors will also be looking for the outcome of the meeting between US President Joe Biden and China’s Xi Jinping as leaders from around the world gather for the Group of 20 summit in Indonesia.

–With support from Ruth Carson.

(More context from the fourth paragraph.)

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