Dollar Hovers near Two-Year Peak over Fed Hike Wagers and China’s COVID-19 Outbreak

On Tuesday, the dollar soared close to its two-year peak levels amid investor bets over the U.S. Federal Reserve’s increasingly hawkish monetary policy outlook and the impact of China’s present COVID-19 outbreak on the economy.

According to Reuters, the dollar index dipped by 0.13% to 101.59 as of 1:55am ET, after reaching a two-year high of 101.86 overnight.

Westpac analysts contended, "Further (dollar index) upside remains a good bet. China growth risks are rising as authorities pursue an aggressive COVID campaign, conditions around Ukraine remain volatile and 'Fed-speak' remains as hawkish as ever."

Global financial hub, Shanghai has been placed under a rigorous lockdown, including barricades surrounding residences leading to public outcry, in order to fight the rising number of COVID-19 deaths and infections in the city. After the government announced mass testing in Beijing and shutdowns of affected parts in the country, the nation’s capital fears an unprecedented lockdown on the horizon which has sent residents into a panic-buying frenzy.

Meanwhile, hawkish comments from several Fed policymakers from the previous week have stoked concerns of a possible half percentage point interest rate hike at the central bank’s next monetary policy meeting in May, reported Reuters.