The US dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

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NEW YORK, Aug 18 (Reuters) – The U.S. dollar index hit its highest level in a month on Thursday as Federal Reserve officials hinted at the need for further rate hikes, and investors reassessed the Wednesday’s minutes of the U.S. central bank’s July meeting as being more hawkish than originally thought.

The Fed must continue to raise borrowing costs to rein in high inflation, a series of U.S. central bank officials said on Thursday, even as they debated how quickly and how much to raise them.

St. Louis Fed President James Bullard said he was inclined to support a third straight interest rate hike of 75 basis points in September.

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San Francisco Fed President Mary Daly said a rate hike of 50 or 75 basis points next month would be a “reasonable” way to bring short-term borrowing costs to “a slightly above” 3% by the end of this year, and on their way to a little higher in 2023. read more

“The rhetoric from the Fed has been very strong from almost everyone – we need to raise rates, we need to raise rates, rates are rising,” said Joseph Trevisani, principal analyst at FXStreet.com in New York. .

The dollar pared gains on Wednesday after minutes from the Fed’s July meeting showed central bank officials were concerned about raising rates too much in their commitment to tame inflation, which was interpreted as moderately accommodating. Read more

The minutes also signaled an important dimension of the Fed’s debate in the coming months: when to slow rate hikes.

But analysts said it was wrong to focus on those parts of the minutes instead of the prevailing view that rates must keep rising.

“Except for the part about the slowing pace of rate hikes, the rest of the minutes are very hawkish,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a statement.

The dollar index last rose 0.71% to 107.39, after hitting 107.57, the highest since July 19.

The euro hit $1.0078, the lowest since July 18. The dollar gained 135.90 against the yen, the weakest level for the Japanese currency since July 28.

The pound slid as low as $1.1920, the lowest since July 22.

The probability of a 75 basis point hike in September has fallen to 42% since the meeting minutes, from 52% earlier on Wednesday, with a 50 basis point hike now having a probability of 58%.

However, consumer price inflation and employment data for August, due ahead of the Fed’s September meeting, will likely affect the magnitude of a rate hike.

The September meeting will also offer new information on how far Fed officials expect rates to rise. Traders see the benchmark rate peaking at 3.66% in March.

Trevisani said he expects the Fed to rise to around 4%, adding that even that is unlikely to be enough to rein in rising prices at an 8.5% annual rate.

Thursday’s data showed the number of Americans filing new claims for unemployment benefits fell last week and data for the prior period was revised down, while a separate report from the Fed of Philadelphia revealed a measure of factory employment in the Mid-Atlantic region on Thursday. jumped in August.

A National Association of Realtors report, however, showed existing home sales fell 5.9% to a seasonally-adjusted annual rate of 4.81 million units in July, the lowest level. low since May 2020. read more

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Additional reporting by Alun John in Hong Kong; Editing by Tomasz Janowski and Richard Chang

Our standards: The Thomson Reuters Trust Principles.

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