NEW YORK: The dollar traded little changed after hitting a fresh two-month high against a basket of peers on Wednesday as unease over US debt ceiling negotiations sent investors to safe havens, while sticky inflation data in Britain hurt the pound.
The impasse in Washington over debt ceiling negotiations has helped lift the dollar, even though it could lead to a default and push the US economy into recession as investors fear this could spell worse trouble for the global economic outlook.
Equity markets around the world fell as well due to the uncertainty, but the impact on the dollar has been less than interest rates and stocks, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“The US dollar has been rallying more or less for three weeks helped by stronger-than-expected data and rising US interest rates,” he said. “I don’t think that the debt ceiling has been a big factor in the foreign exchange market per se.”
The dollar index, which tracks the US currency against six major peers, meandered after earlier touching 103.77, its highest since March 20. The index last rose 0.106% at 103.64
The pound dropped to a one-month low against the dollar of $1.23645 and was last just above that, down 0.19%, after data showed British inflation slowed by much less than markets had been expecting.
The British currency lost ground against the euro too, which was last down 0.25% at 1.1492.
Core eurozone services inflation reported on Tuesday remained elevated, hurting Sweden’s crown, as the European Central Bank is poised to raise interest rates in June and July.
New Zealand’s dollar, meanwhile, slipped after the central bank signaled it was done tightening after raising rates by 25 basis points to the highest in more than 14 years.
The dollar strengthened 0.48% against the crown, while the New Zealand dollar slid 2.03% against the US currency to 0.61210.
Higher inflation, leading to higher for longer Bank of England rates, had supported the pound in recent months but that relationship is now starting to reverse.
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