U.S. Dollar Hits Highest In Nearly Two Years On Expected Rate Increases

• The dollar surged to a nearly two-year high on Wednesday after minutes of the last Federal Reserve meeting reinforced expectations of multiple half percentage-point rate increases to control soaring inflation. The dollar index, which measures the greenback's value against six major currencies, climbed to 99.7780, its strongest level since late May 2020. It was last up 0.2% at 99.70. 
• Fed officials viewed the hefty rate increases as appropriate at future meetings, especially if inflation pressures intensify, minutes showed. They would also have preferred a 50 basis point rise in the target range for the federal funds rate at the March meeting. 
• Fed officials also agreed to reduce the balance sheet by $95.0Mn per month - $60.0Bn of its Treasury holdings and $35.0Bn of mortgage-backed securities - over three months, according to the minutes of the March meeting. 
• This strengthening of the US dollar poses a challenge to countries that have a heavy import bill that is denominated in USD, as this will increase the imported inflation portion of their CPI measure

(Source: Reuters)