Investing.com – The US dollar made gains in early European trade on Tuesday, with risk sentiment slipping as the debt-ceiling impasse persisted and after hawkish comments from Federal Reserve officials.
At 02:55 EST (06:55 GMT), the dollar, which measures the greenback against a basket of six other currencies, rose to 103.140, not far from last week’s high of 103.63 in two months.
US President Joe Biden and House Speaker Kevin McCarthy ended discussions late Monday with no agreement on how to raise the US government’s $31.4 trillion debt ceiling.
US Treasury Secretary Janet Yellen added to the urgency of the situation by saying that it was now “highly likely” that her department would run out of sufficient cash in early June.
There are less than two weeks before a possible first-ever US government default that would roil financial markets, and the dollar, which often acts as a safe haven in times of stress, has seen some demand.
The dollar was also boosted by comments from central bank officials which indicated that a rate hike in June is still a viable option.
St. Louis Fed President James Bullard, a noted hawk, has backed two more rate hikes this year in order to tame inflation, while his Minneapolis colleague Neel Kashkari said the central bank should signal next month that the tightening is far from over. If it stops next month.
The Fed chief hinted at a pause in the June central bank meeting during a conference call on Friday, but he may still have to convince a number of his colleagues.
It fell 0.1% to 138.52, after earlier rising to a nearly six-month high in Asian trade, reflecting the stark contrast between a still-hawkish Fed and a very hawkish Fed.
However, the yen benefited from data showing that the country unexpectedly grew in May, while growth hit a record high.
It traded largely flat at 1.0813 ahead of the release of May preliminary data for the Eurozone, which is expected to show a strong services sector supporting lackluster manufacturing.
European Central Bank policymaker Pablo Hernandez de Cos said on Monday that countries still need to raise interest rates further to bring inflation down to its medium-term target of 2%.
It fell 0.1% to 1.2426, with quick numbers also expected in the UK, while the risk-sensitive index traded largely flat at 0.6653 even with the positive sign of some resilience in the economy.
It rose 0.2% to 7.0463, with the yuan trading near a six-month low against the dollar amid continuing uncertainty over the country’s slowing economic recovery.
It rose 0.2% to 346.43 ahead of a policy-setting meeting by the Hungarian central bank, which could lead to a key rate cut for the first time in three years.
The European Union, which oversees the highest borrowing costs in the European Union, is expected to cut its overnight rate by a full percentage point to 17% later on Tuesday.