dollar advances vs major currencies as risk appetite fades

Shafaq News./ The dollar rose against major currencies on Wednesday in choppy trading, gaining safe-haven bids as risk appetite worsened with stocks on the defensive amid hawkish comments from U.S. Federal Reserve officials that suggested more interest rate increases are likely to tame inflation.

Analysts, however, remained convinced that the currency has already hit its peak and is in the midst of an overall downtrend.

"The dollar will continue to sputter due to the tamer outlook for both U.S. inflation and Fed policy," said Joe Manimbo, senior market analyst, at Convera in Washington.

"The dollar is likely to remain on a descending path as long as markets price in a material risk of U.S. rate cuts later this year."

The greenback earlier fell across board after a slate of weak economic data backed expectations that the Fed may be nearing a pause in its rate-hiking cycle.

The earlier sell-off in the dollar came after the Bank of Japan maintained ultra-low interest rates. The yen initially gained sharply, but recovered on expectations for tighter policy in the coming months.

Fed officials on Wednesday, however, dampened expectations that the U.S. central bank is nearing the end of its tightening policy.

Cleveland Fed President Loretta Mester said the Fed needs to raise interest rates a "little bit" above the 5.00% to 5.25% range in order to bring inflation to heel.

St. Louis Fed President James Bullard, for his part, said the Fed should get the policy rate of interest above 5% "as quickly as we can" before pausing rate increases needed to battle an ongoing outbreak of inflation.

Their comments helped push U.S. stocks lower and extended a rally in Treasuries that weighed on yields.

(Reuters)