Greenback hits fresh 2-month peak, Norwegian krone rises

[MILAN] The US dollar hit a fresh two-month high on Thursday (Sep 24) after a sharp rally, which was fuelled by expectations of additional US Federal Reserve interest rate hikes after strong economic data and a hawkish shift in rhetoric.

Meanwhile, the Swiss franc fell against the euro and the dollar after the Swiss National Bank left rates unchanged, as expected, and reiterated its willingness to be active in the foreign exchange market, although it tempered its tone slightly after a weakening of the currency in recent months.

The Norwegian krone rose after the central bank raised its policy interest rate by 25 basis points to 4.5 per cent on Thursday, and said it may hike again.

Giada Giani, economist at Citi, said: “Differently to other central banks (who are) mostly concerned about rising energy prices, the Norges Bank’s focus remains squarely on domestic price pressures and inflation having been stuck above target for several quarters.”

She argued that Norges Bank remains the most hawkish in advanced economies.

The Swiss franc dropped 0.26 per cent against the dollar to 0.8273, reversing an earlier rise.

Jack Allen-Reynolds, chief euro area economist at Capital Economics, said: “Forex intervention would be the first tool out of the toolkit to address a stronger franc.”

He added that the franc could strengthen in the event of a global equity sell-off in 2027.

The Norwegian krone was up 0.42 per cent at 9.471 against the dollar.

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Greenback hits near two-month high on Fed rate hike prospects

The Swedish currency was flat at 9.907 versus the dollar. It reached 9.935, the lowest level since April 2025, before the central bank decision to keep key interest rate unchanged at 1.75 per cent, as expected, while flagging stronger growth and the risk that inflation will pick up in the months ahead.

US rate outlook in focus

Two-year Treasury yields, highly sensitive to policy rate expectations, hit their highest since May 2024 on Wednesday, as strong business activity data reignited inflation concerns.

The Fed raised rates and signalled further tightening last week, with chair Kevin Warsh stressing the central bank’s independence despite repeated calls from US President Donald Trump for lower borrowing costs.

The hawkish stance has eased concerns that a Warsh-led Fed would take a softer line on inflation, a prospect that could have weighed on US assets.

Francesco Pesole, forex strategist at ING, said: “Very strong US purchasing managers’ index, higher oil prices and soft risk sentiment have all contributed to the bullish narrative, although the move is starting to look stretched relative to fundamentals.

“We are cautious in calling for a bottom in the dollar just yet, because any upside surprise in upcoming US data releases can easily prompt markets to fully price in an October Fed hike and prop up short-term rates even more.”

Investors closely watched energy prices and geopolitics, with Brent crude slightly up after jumping overnight as Iran and the US remain far apart on how to end the war.

The greenback tends to strengthen when oil prices rise, as investors often sell currencies of energy-importing economies such as the euro and yen, whose trade balances are more vulnerable to higher crude costs.

The US dollar index, which measures its value against a basket of six major currencies, was up 0.13 per cent at 101.22, after hitting 101.31, its firmest since Jul 29. The dollar’s strength sent the euro to a two-month low of US$1.1373.

Yen on track for fifth straight daily fall

Japanese Finance Minister Satsuki Katayama said the principles underpinning the coordinated Japan-US currency intervention in July remain intact, but sentiment remained fragile after last week’s Bank of Japan rate hike failed to convince investors that a faster tightening cycle is in store.

The dollar was up 0.28 per cent versus the yen at 158.75, its highest level since Sep 3.

Daragh Maher, senior forex strategist at HSBC, said: “The yen is another currency that may find the going tough in the coming weeks, although the ever-present threat of forex intervention should help temper the rise in the USD/JPY.”

“The yen surge in early September has already reversed and with positioning less stretched, we are unlikely to see a fresh short squeeze.” REUTERS