U.S. Dollar Higher Amid Expectations For Sharper Fed Rate Hikes

The U.S. dollar strengthened against its major counterparts in the Asian session on Tuesday, following hawkish comments from St. Louis Fed President James Bullard suggesting that the Fed Funds rate should be raised to 3.50 percent by the end of the year.

The central bank is prepared to get to neutral expeditiously, Bullard said on Monday, reiterating that he supports interest rate at 3.50 percent by the year end.

The path outlined by Bullard would require 50 basis point rate hikes at each of the remaining meetings for this year.

Bullard did not rule out a 75 basis point rate hike, but the base case is not for more than 50 bps at any meeting.

The benchmark 10-year treasury yield surged to 2.868 percent overnight, its highest level since December 2018, before closing at 2.862 percent.

The greenback appreciated to a 6-day high of 1.2988 against the pound and a 5-day high of 1.0761 against the euro, up from its early lows of 1.3018 and 1.0788, respectively. The next possible resistance for the greenback is seen around 1.28 against the pound and 1.05 against the euro.

The greenback firmed to 128.33 against the yen, its strongest level in nearly 20 years. Against the franc, it touched more than a 1-year high of 0.9466. The greenback may target resistance around 131.00 against the yen and 0.96 against the franc.

In contrast, the U.S. currency weakened to 0.7388 against the aussie and 0.6742 against the kiwi, off its early highs of 0.7343 and 0.6719, respectively. The greenback is seen finding support around 0.76 against the aussie and 0.70 against the kiwi.

The greenback fell to a 5-day low of 1.2569 against the loonie, from a high of 1.2629 seen at 5:30 pm ET. On the downside, 1.24 is seen as its next likely support level.

Looking ahead, Canada housing starts for March are scheduled for release at 8:15 am ET.

U.S. building permits and housing starts for March are set for release in the New York session.