By Ira Iosebashvili
The dollar touched a 13-year high Wednesday, powered by rising U.S. bond yields and expectations of ramped up fiscal stimulus under the incoming presidential administration.
The ICE Dollar Index, which gauges the U.S. currency against a basket of six others, rose to 100.57 earlier in the session, its highest level since April 2003.
Rising government bond yields in the U.S. have driven up the dollar against currencies such as the euro, where yields remain close to historic lows. The euro recently was down 0.4% at $1.0681, its lowest level since December 2015.
With Republicans in control of the House and Senate, some investors also believe that President-elect Donald Trump will have an easier time pushing forward policies that would stimulate the U.S. economy and boost the dollar further.
"Now that we have a new administration on the way, the dollar's rally has received a fresh dose of octane," said Joe Manimbo, an analyst at Western Union.
Federal-funds futures, used to bet on central-bank policy, on Wednesday showed that investors assigned a 90.6% likelihood that the Federal Reserve will increase rates in December. Higher rates tend to boost the dollar by making it more attractive to yield-seeking investors.
Some investors believe that accelerating growth will spark inflation, forcing the Fed to raise rates at a faster clip next year, Mr. Manimbo said.
The bump in U.S. yields has also sucked money out of emerging markets, as investors shift money out of the comparatively risky currencies of developing countries into Treasurys. Emerging-market currencies also have been hurt by fears that the protectionist policies supported by Mr. Trump could hurt the economies of countries that export heavily to the U.S.
The dollar recently was up 1.1% at 3.3255 against the Turkish lira, a record high. It rose 0.5% against the Russian ruble to 64.77, and gained 1.3% against the South African rand, to 14.37.
"Investors with a long-term horizon are advised to wait until further depreciation offers attractive entry points for bullish emerging market exposure," analysts at Société Générale said in a report.
The Wall Street Journal Dollar Index, which gauges the U.S. currency against 16 currencies, was up as high as 90.90, its strongest level since February.
Write to Ira Iosebashvili at email@example.com
(END) Dow Jones Newswires
November 16, 2016 15:28 ET (20:28 GMT)
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