In New York foreign exchange markets, the dollar surged against major currencies, briefly recovering the 160 yen level. This followed Federal Reserve Chair Warsh's suggestion that rate hikes may be necessary to curb inflationary pressures. In late trading, the dollar/yen was up 0.48% at 160.15 yen, and the dollar index rose 0.59% to 99.69, briefly hitting 99.727, its highest level since August 17. In his speech at the Jackson Hole conference, Warsh said that if he is not convinced that underlying inflation is slowing toward the 2% target, there is "work to do," offering the clearest hint yet of a possible rate hike. According to CME FedWatch, the probability of at least a 25 basis point rate hike at the September FOMC meeting rose to 57.5% from about 35% before the speech. The euro was down 0.59% at $1.1582, and the British pound was down 0.47% at $1.3528.
Fed Chair hints at rate hike, increasing probability of a September hike, which would raise the effective federal funds rate.
Rate hike expectations push Treasury yields higher, so the 10-year yield rises.
