The dollar rose broadly on Monday on expectations the U.S. Federal Reserve is on track to raise interest rates next week following a solid November jobs report.
The New Zealand dollar and Norwegian crown were big losers to the greenback as commodity prices tumbled again and traders reckoned central banks would embark on more policy stimulus to help their economies.
“It’s pretty much a done deal they will move,” said Charles St-Arnaud, currency strategist at Nomura Securities International in New York, referring to the Fed which holds a policy meeting on Dec. 15-16.
U.S. interest rate futures implied traders are pricing in about a 78 percent chance that U.S. policymakers will raise rates for the first time in nine years next week, according to CME Group’s FedWatch program.
The greenback climbed for a second day following last Thursday’s stunning 3 percent fall against the euro after the European Central Bank delivered less stimulus than the market expected.
The euro was down 0.4 percent at $1.0843, while the dollar edged up about 0.1 percent to 123.32 yen.
The dollar’s rise on Monday was limited by a drop in U.S. Treasuries yields as stock prices across the world fell, led by weakness in energy shares. U.S. two-year yields slipped about 2 basis points to 0.931 percent.
While the greenback gained about a third of a percent against a basket of currencies, it surged 1.5 percent against the New Zealand dollar to $0.6647 ahead of Wednesday’s meeting of the Reserve Bank of New Zealand. Another cut in interest rates there is on the table but, many say, is not priced in by markets.
The dollar was up 1.6 percent against the Norwegian crown at 8.6579 crowns as Brent oil futures in London fell to near seven-year lows on OPEC’s disagreement on output cuts and the dollar’s rebound that made it more expensive to buy crude globally.
Brent futures for January 2016 delivery LCOc1 settled 5 percent lower at $40.73 a barrel. The drop in oil prices knocked the Canadian dollar to its weakest level against the greenback in 11 years. The loonie was last down over 1 percent at C$1.3512 to the dollar.
The greenback climbed to its strongest level against the Russian ruble since late August, last up 2 percent at 69.42 rubles. “The continued decline in oil prices are putting downward pressure on these currencies,” St-Arnaud said.