By Chibuike Oguh
NEW YORK, Sept 10 (Reuters) – The dollar rose against major currencies on Thursday, reversing some of this week’s losses triggered by rising oil prices and global bond yields, while the euro fell after the European Central Bank delivered an expected rate increase.
The ECB raised interest rates by 25 basis points, marking the second time this year the central bank has moved to quell an energy-driven rise in inflation triggered by the Iran war.
The euro dropped immediately after the decision and was last down 0.03% against the dollar at $1.163. Against the Swiss franc, the dollar strengthened 0.14% to 0.811.
The main driver of the dollar’s gains appeared to be U.S. producer prices data, which came in in line with market expectations and boosted the chances of a Federal Reserve rate hike next week, said Eugene Epstein, head of structured products North America at Moneycorp.
“ECB rate hike odds have all increased so I would argue it was hawkish but I really think the main driver of the stronger dollar, which is the case across all currency pairs, is the PPI. I think markets are quite jittery ahead of tomorrow’s CPI, which is really the main event,” he said.
OIL PRICES JUMP
Iran-aligned Houthis seized control of Yemen’s port of Mocha on Thursday, posing a further threat to Red Sea traffic, while Gulf traffic remains restricted through the Strait of Hormuz as tanker attacks in the region have intensified in recent days.
Brent crude futures rose 5% to $106.56 a barrel.
Given Europe’s reliance on imported energy, the euro is typically highly sensitive to oil-price movements. That relationship has weakened as the war has dragged on, limiting support for the dollar.
The dollar index rose 0.15% to 98.93, on track to snap three straight sessions of losses.
YEN STRENGTH EASES
The yen was on track to retreat from three straight sessions of gains as the dollar edged higher. The yen has gained more than 6% since a late-July intervention. It traded down 0.41% at 154.14 per dollar, leaving the Japanese currency not far from seven-month highs ahead of an expected BOJ rate hike next week.
The U.S. Treasury intervened alongside the Bank of Japan to support the yen in late July, selling euros rather than dollars. Earlier this week, Treasury Secretary Scott Bessent said he favoured using Washington’s financial power as a foreign policy tool, while the Treasury announced a larger bond buyback operation for Thursday to curb rising long-term yields.
The euro strengthened 0.26% against the Japanese yen to 179.07.
Elsewhere, the Canadian dollar weakened 0.1% versus the greenback to C$1.382 per dollar while the pound sterling weakened 0.16% to $1.3521.
China’s yuan held steady near a 3-1/2-year high at 6.710 per dollar.
(Reporting by Chibuike Oguh in New York, editing by Deepa Babington and Chris Reese)
