The U.S. dollar hit a two-week high on Tuesday, rising 0.9% to 104.55 in the dollar index which measures the greenback’s performance against a basket of major world currencies.
Investors’ focus is firmly fixed on the minutes of the Federal Reserve’s December meeting, which are scheduled to be released on Wednesday. Onlookers are hopeful that these minutes will give insight into the interest rate policies that will be adopted in 2023.
Last month, the Federal Reserve raised rates by 50 basis points after delivering four consecutive 75-basis point hikes in the year. While inflation has seemingly cooled off in recent months, the central bank remains insistent that it must keep rates high in an effort to tame inflation over the long term.
“The Fed was hawkish but the market didn’t buy into it,” Nordea chief analyst Niels Christensen said of the Federal Reserve’s recent approach. “The market is pricing in cuts towards the end of this year and that’s not the message from the Fed as we see it.”
Japan’s yen also performed strongly on Tuesday, hitting a seven-month peak during Asian trading hours at around 130.45 per dollar.