The U.S dollar was boosted yesterday by hawkish comments from Federal Reserve officials

• The dollar's moves were primarily a function of Brainard's hawkish comments
• The euro struggled yesterday amid concerns about the outcome of the French elections
• The Australian dollar is boosted by the prospect of policy tightening by the Reserve Bank of Australia

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The U.S dollar hit its highest in nearly two years yesterday, boosted by hawkish comments from Federal Reserve officials who pushed for a quick reduction in the central bank's bloated balance sheet, with one of them expressing openness to hefty rate increases of half a percentage point. The dollar index rose as high as 99.526, the highest since late May 2020. It was last up 0.5% at 99.498. Fed Governor Lael Brainard, usually one of the Fed's more dovish policymakers, said on Tuesday she expects methodical interest rate increases and rapid reductions to the Fed's nearly $9 trillion balance sheet to bring U.S. monetary policy to a "more neutral position" later this year.

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Further tightening will follow as needed. Kansas City Fed President Esther George, a voting member of the Federal Open Market Committee, also in remarks on Tuesday supported a rapid run-off of the Fed balance sheet, and said as well that "50 basis-points is going to be an option that we'll have to consider." The dollar's moves were primarily a function of Brainard's hawkish comments today. She was very clear on two things. One, the Fed wants to reduce the balance sheet quite aggressively and much more quickly than the last cycle. And two, the Fed is really open to a 50-basis point hike and could do so at any point over the next few meetings. 

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This is the kind of language that you don't see from many Fed officials, especially Brainard. The dollar rose 0.7% against the yen to 123.63 yen after earlier hitting a one-week peak of 123.66. On March 28, the dollar soared to 125.105 yen, the highest level since August 2015. The euro, on the other hand, struggled amid concerns about the outcome of the French elections. It was down 0.6% at $1.0901 and matched a low of $1.09 hit on March 14. 

Just days earlier amid increased optimism over an end to Russia's invasion of Ukraine, the euro rose to a one-month high of $1.1185. President Emmanuel Macron is still ahead in opinion polls but his far-right Eurosceptic rival Marine Le Pen has been closing the gap, and a poll on Monday put victory within the margin of error, unnerving investors ahead of the French presidential election's first round on Sunday. Expected price swings for the euro, or implied volatility, climbed to three-week highs.

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Euro-EUR

The single currency fell today in the Asian trading session to its lowest level in one month against a strengthening dollar as the prospect of new Western sanctions on Russia added pressure to the European currency. A new round of sanctions against Russia are expected to be announced today by the U.S. and the EU. Overall, the EUR/USD traded with a low of 1.0898 and a high of 1.0987 before closing the day around 1.0903 in the New York session.

Japanese Yen-JPY

The Japanese Yen traded lower as the U.S dollar hit its highest in nearly two years yesterday, boosted by hawkish comments from Federal Reserve officials who pushed for a quick reduction in the central bank's bloated balance sheet, with one of them expressing openness to hefty rate increases of half a percentage point. Overall, the USD/JPY traded with a low of 122.35 and a high of 123.65 before closing the day around 123.58 in the U.S session.

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British Pound-GBP

The British Pound held at one-week highs versus the euro yesterday as strong data boosted the British currency while the euro struggled on growing concerns about far-right candidate Marine Le Pen winning this month's French presidential elections. Positive British PMI data supported the pound, building on Monday's gains. Overall, the GBP/USD traded with a low of 1.3064 and a high of 1.3165 before closing the day at 1.3070 in the New York session.

Canadian Dollar-CAD

The Canadian Dollar gained as Canada's exports rose 2.8% in February to a record high, driven mostly by energy products, while imports climbed 3.9% from the previous month, data from Statistics Canada showed yesterday, with economists anticipating more gains for exports ahead. The country's trade surplus with the world narrowed to C$2.66 billion. Overall, USD/CAD traded with a low of 1.2400 and a high of 1.2495 before closing the day at 1.2483 in the New York session.

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Australian Dollar-AUD

The Australian Dollar rallied in choppy trading led by the Australian dollar, boosted by the prospect of policy tightening by the Reserve Bank of Australia (RBA), while the euro fell on French election worries and the likelihood of more sanctions on Russia over Ukraine. The Aussie dollar paced gains among commodity currencies after the RBA dropped its pledge to be "patient" on tightening policy. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.

Euro-Yen EUR/JPY

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has gained 0.04%.

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Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has gained 0.36%.

Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has gained 1.13%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has lost 0.30%.

Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has gained 0.05%.

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