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FOREX-Commodity currencies at multi-month highs, sterling firm on BoE rate hike bets

Credit: REUTERS/© Jason Lee / Reuters

Commodity currencies stood near multi-month highs on Thursday on strong raw material prices while the improved risk mood saw the U.S. dollar losing earlier momentum built from expectations the Federal Reserve would tighten monetary policy.

By Hideyuki Sano

TOKYO, Oct 21 (Reuters) - Commodity currencies stood near multi-month highs on Thursday on strong raw material prices while the improved risk mood saw the U.S. dollar losing earlier momentum built from expectations the Federal Reserve would tighten monetary policy.

Sterling was also riding high on firming perceptions the Bank of England (BoE) will raise interest rates as soon as next month to curb inflation, despite softer-than-expected UK price data on Wednesday.

"It looks almost certain that the BoE will raise interest rates in November, perhaps again in December, as inflation could get out of control otherwise given a severe labour shortage," said Yukio Ishizuki, senior strategist at Daiwa Securities.

"And globally we are likely to see rate hikes to curb inflation in many countries, which means the U.S. dollar is standing out less than before, in terms of rate hike expectations."

The dollar's index, having eased 0.3% so far this week, stood at 93.602 =USD, near its lowest level since late September.

Leading gains against the dollar were commodity currencies as oil prices hit their highest levels in many years.

The Canadian dollar hit a four-month high of C$1.2308 per U.S. dollar on Wednesday and last traded at C$1.2325 CAD=D4, thanks also to higher-than-expected Canadian inflation data.

The Australian dollar also extended its bull run to hit a 3-1/2-month high of $0.75225 AUD=D4 while the New Zealand dollar hit a four-month peak of $0.7208 NZD=D4.

The British pound stood at $1.3828 GBP=D4, just shy of its Tuesday high of $1.3834, its highest level in over a month.

Against the euro, sterling was near its highest levels since February 2020, at 84.26 pence per euro EURGBP=D4.

The UK currency held momentum due to rising expectations of BoE rate hike.

British overnight indexed swaps are pricing in about 80% chance of a 0.25% rate hike on Nov. 4.

The euro held firm at $1.1652 EUR=, staying close to Tuesday's three-week peak of $1.1670.

The positive risk mood weighed on the Japanese yen, often perceived as a safe-haven currency.

The dollar stood at 114.39 yen JPY=, near Wednesday's four-year high of 114.695 yen.

The yen is dented by expectations that its trade deficit could widen as rising oil prices boost its imports bill while its car exports are hampered by chips shortages.

In cryptocurrencies, bitcoin hit a record high of $67,016 BTC=BTSP, having gained almost 70% from a low hit a month ago.

Ether climbed to $4,126 ETH=, edging near its record peak of $4,380 hit in May.

World FX rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by Hideyuki Sano; Editing by Sam Holmes)

((hideyuki.sano@thomsonreuters.com; +81 3 4520 1195;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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