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Dollar index hits 13-year high

The trade-weighted dollar has hit its highest level since the day US forces closed in on the capture of Saddam Hussein towards the end of the Iraq war more than 13 years ago.

The index that measures the greenback against a basket of its peers gathered pace on Wednesday, rising to 100.530, reports Roger Blitz.

That takes it past the previous intraday high of 100.510 reached on December 2 last year, when comments from Federal Reserve chair Janet Yellen warmed up the market for a rate rise.

The index will then be looking at surmounting the next highest intraday level of 101.810 reached on April 7 2003. On that day, secretary of state Colin Powell said the Iraq war was drawing to a close and Saddam Hussein and his sons were being targeted by US warplanes.

The index, which is heavily weighted towards the euro, has risen 2.6 per cent since election day and gained 0.2 per cent on Wednesday as investors price in further rate rises. The probability of a December rise is above 90 per cent, according to CME Group.

The euro fell below $1.07 for the first time in nearly a year, while 2-year Treasury yields are up to 1.0132 per cent. The dollar is pushing higher against the yen, poised to hit the Y110 mark for the first time since June.

Three inter-related drivers are responsible for the dollar’s rise, says Brown Brothers Harriman’s Marc Chandler – rate expectations, likely fiscal stimulus from the incoming Trump administration and “the rise of the populist right”, which is weighing on the euro.

Chart from Bloomberg

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