Dollar Climbs as Fed’s Waller Pushes Back on Dovish Rate Bets

(Bloomberg) — The dollar climbed against most major peers Monday after Federal Reserve Governor Christoper Waller pushed back on bets the US central bank was nearing the end of its hiking cycle.

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The yen tumbled as much as 0.8% while the Aussie fell 0.3% against the greenback after Waller said the US central bank have got a ways to go before they stop hiking. Waller also said the market got “way out in front” over the unexpected cooling in inflation.

The market is reacting to Waller’s hawkish comments that are “a reminder the Fed isn’t going to change its view on one good CPI outcome,” said Jason Wong, a strategist at Bank of New Zealand in Wellington.

The greenback’s climb comes after a gauge of the dollar slid 3.5% last week, its biggest fall since the early days of the pandemic as traders trimmed bets on aggressive Fed hikes after US inflation slowed more than expected. Treasury yields also tumbled and stocks surged from hope the Fed won’t need to lift rates as much as anticipated.

The dollar can partly unwind last week’s losses as they were out of proportion to the size of the miss in inflation, Commonwealth Bank of Australia strategists wrote in a note to clients. Fed speakers this week are likely to push back on the market’s reaction as they want to tighten financial conditions, not loosen them, they said.

Investors will also be looking to the outcome of a meeting between US President Joe Biden and China’s Xi Jinping as leaders from around the world gather at the Group-of-20 summit in Indonesia.

–With assistance from Ruth Carson.

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