Dollar: The Dollar Stands, Approaching Its 16-Month High

SINGAPORE: The dollar is building on last week's gains and has reached its highest level for 16 months on Monday, as traders expect the US Federal Reserve to continue tightening its policy monetary.

The Fed reaffirmed its intention to raise interest rates by 25 basis points in December and then another two potential rate hikes by mid – 2019, due to the strength of the Fed. economy and increasing wage pressures.

The greenback has also benefited from a safe haven offering, as market participants have shifted their riskier assets away due to US-China trade tensions, China's economic slowdown, Brexit uncertainties and confrontation. between Rome and the European Union face the Italian project of a large monetary strategy. – budgetary expenditure and significant budget deficit.

The dollar index rose 0.12% on Monday, shifting hands to 97.02, hovering just below its 97-month high reached Oct. 31, a record 97.2%. The dollar index has strengthened four weeks in a row, gaining 0.37% last week.

"The dollar index was firm all week and rebounded after the mid-term election results.In the future, the measures will be influenced by developments regarding the Italian budget and the Brexit policy "said Sim Moh Siong, foreign exchange strategist at the Bank of Singapore. .

The dollar gained 0.1% on the Japanese yen, which fell to 113.94 dollars on Monday, near its five-week low of 114.08. The dollar was preferred to the yen because of the divergent monetary policies of the Fed and the Bank of Japan.

As the Fed is about to raise interest rates, the BoJ should keep its monetary policy very flexible in the face of sluggish growth and inflation.

The widening of the interest rate differential between US and Japanese bonds has made the dollar more attractive than the yen, which is often a funding currency for carry trades.

The pound lost 0.25% to 1.2941 dollar on Monday. Brexit fears weighed on the pound as investors have not yet developed an orderly exit plan.

Less than five months before Britain leaves the EU on March 29, negotiations on a plan to safeguard the land border between the British-dominated Northern Ireland and Ireland EU members are still blocked in case they do not reach a long-term agreement.

Four British ministers who remain in the European Union are about to leave Theresa May's government after Brexit, the Sunday Times reported, adding to political uncertainty.

"Eventually, the EU and May will come to an agreement.The two sides want to conclude the agreement, but the only risk is whether May will still be the Prime Minister.I am waiting for this. that the pound sterling remains restless in its wide recent range, "added Sim Moh Siong.

The euro traded at 1.1322 dollar on Monday, down 0.11%. The single currency lost ground against the dollar over the previous three trading sessions, as investor confidence was weakened due to the stalemate over Italy's budget.

The European Commission (EU) rejected the Italian budget for 2019 last month, saying it had ignored a previous commitment to reduce the country's deficit. The EU gave Rome until Tuesday to present a revised version of the budget.

The EU also cut its forecast for Italian growth last week, reinforcing investor anxiety over Italy's debt and economic outlook. (Report by Vatsal Srivastava, edited by Eric Meijer)