Finance

By Sinéad Carew

NEW YORK (Reuters) – Stock indexes around the world fell sharply on Monday and the dollar reversed course after hitting a two-decade high while oil prices sank as concerns about slowing growth and a tightened lockdown in Shanghai pushed investors toward safer bets.

Oil prices tumbled almost 6% on Monday as continued coronavirus lockdowns in China, the top oil importer, fed worries about the demand outlook.

U.S. Treasury yields eased on Monday after the benchmark 10-year note earlier hit fresh 3-1/2 year highs as inflation fears continued to roil markets and traders readied for consumer price data and the auction of $103 billion in new government debt later this week.

After Friday’s bruising sell-off, U.S. stocks sold off sharply on Monday with investors rushing to protect themselves against the prospect of a weakening economy.

“With slowing growth, regardless of a recession or not, you’re going to see multiple compression for anything that’s growth related. It’s not necessarily an indictment of their fundamentals. It’s an indictment of their multiples,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“Investors are far more concerned with capital preservation at this point, and you’re more concerned with raising cash in the event the macro environment worsens.”

Central banks in the United States, Britain and Australia all raised interest rates last week, and investors were bracing for more tightening as policymakers fight soaring inflation.

“Markets are continuing to re-price inflation risks as it becomes more evident that inflation is likely to be with us for longer than some people had hoped,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina, also citing increasing recession risks.

And he sees policy tightening around the world adding to economic “slowdown pressures that are already building due to the lockdowns in China and the war in Europe.”

The Dow Jones Industrial Average fell 499.33 points, or 1.52%, to 32,400.04, the S&P 500 lost 112.72 points, or 2.73%, to 4,010.62 and the Nasdaq Composite dropped 473.33 points, or 3.9%, to 11,671.34.

On Monday the S&P hit its lowest level in more than a year while Nasdaq’s trough for the session so far was its lowest point since November 2020. Both the S&P and Nasdaq on Friday posted their fifth straight week of declines – their longest losing streaks in roughly a decade. [.N]

MSCI’s gauge of stocks across the globe shed 2.76% on Monday, hitting its lowest level since December 2020, while emerging market stocks lost 1.62%.

GLOBAL CONCERNS

Investors were focused China’s zero-COVID policy, with Shanghai tightening the city-wide lockdown for 25 million residents. The policy prompted concerns about supply chain problems as many technology companies manufacture their products in China.

While Vladimir Putin on Monday exhorted Russians to battle, he was silent about plans for escalation of the war in Ukraine, where there was no let-up in fighting. Kyiv described a stepped-up Russian offensive in the east and a push to defeat Ukrainian troops in a steelworks in Mariupol. {nL2N2X1018]

With investors juggling so many worries, one place they were looking for safety was in the dollar index.

The index, which measures the dollar against a basket of currencies, had earlier risen 0.6%, hitting the latest in a string of 20-year highs.

The dollar index fell 0.058%, with the euro up 0.05% at $1.0556. The yen strengthened 0.17% to the dollar at 130.35.

Dollar strength also put pressure on Latin American stocks and currencies on Monday. The Mexican peso lost 1.00% versus the U.S. dollar at 20.36.

U.S. crude recently fell 5.94% to $103.25 per barrel and Brent was at $106.04, down 5.65% on the day. [O/R]

Spot gold dropped 1.5% to $1,854.77 an ounce. U.S. gold futures fell 0.94% to $1,857.10 an ounce. [GOL/]

(Reporting by Sinéad Carew in New York; Additional reporting by Tommy Wilkes in London; Wayne Cole in Sydney; Editing by Chizu Nomiyama, Lisa Shumaker and Nick Macfie)

By Alun John and Elizabeth Howcroft

HONG KONG / LONDON (Reuters) -Bitcoin fell to its lowest level since July 2021 on Monday as slumping equity markets continued to hurt cryptocurrencies, which are currently trading in line with so-called riskier assets like tech stocks.

Bitcoin dropped to as low as $32,763.16 shortly before 1100 GMT, in its fifth consecutive session of falling.

The cryptocurrency has dropped 13% so far in May and has lost more than half its value since it hit an all-time high of $69,000 in November last year.

“I think everything within crypto is still classed as a risk asset, and similar to what we’ve seen with the Nasdaq, most crypto currencies are getting pummelled,” said Matt Dibb, COO of Singapore-based crypto platform Stack Funds

The tech heavy Nasdaq fell 1.5% last week, and has lost 22% year to date, hurt by the prospect of persistent inflation forcing the U.S. Federal Reserve to hike rates despite slowing growth. Nasdaq futures were down a further 2.3% on Monday. [MKTS-GLOB]

Dibb said other factors in the decline over the weekend – bitcoin closed on Friday around $36,000 – were the crypto market’s notoriously low liquidity over the weekends, and also short lived fears that algorithmic stablecoin called Terra USD (UST) could lose its peg to the dollar.

Stablecoins are digital tokens pegged to other traditional assets, often the U.S. dollar.

UST is closely watched by the crypto community both because of the novel way in which it maintains its 1:1 dollar peg, and because its founders have set out plans to build a reserve of $10 billion worth of bitcoin to back the stablecoin, meaning volatility in UST could potentially spill over into bitcoin markets.

Ether, the world’s second largest cryptocurrency, which underpins the ethereum network, fell as low as $2,360 on Monday, its lowest since late February.

(Editing by Kim Coghill)

By David Milliken and William Schomberg

LONDON (Reuters) -Bank of England policymaker Michael Saunders, who called in vain for a big interest rate hike last week, said inflation risked exceeding BoE forecasts that already go above 10%, and urged the BoE to “lean heavily” against it.

With price growth already more than three times the BoE’s 2% target, Saunders and two other members of the nine-strong Monetary Policy Committee voted to raise Bank Rate from 0.75% to 1.25% at their meeting last week.

But a majority of six members backed a smaller rise to 1.0% as they worried about signs of an economic slowdown.

Saunders said in a speech that he put “considerable weight” on the risk that inflation pressures would probably be greater and more persistent than expected by the BoE.

He told an audience at the Resolution Foundation think tank that the BoE should “lean strongly” against high inflation expectations because “the process of re-anchoring price expectations could be very costly in economic terms”.

Key measures of longer-term price growth expectations were uncomfortably high and were feeding into underlying pay growth and services inflation.

“The strength of external costs is eroding real incomes and is likely to cap real spending,” Saunders said, acknowledging the concerns of his colleagues.

“But, by creating a long period of above-target inflation, these external cost increases also may exacerbate the rise in inflation expectations and hence, with the tight labour market, could make it harder to ensure domestic inflation pressures return to a target-consistent pace.”

Britain’s consumer prices rose by 7.0% in the 12 months to March – a 30-year high – and the BoE said last week that inflation was likely to peak at more than 10% later this year, causing a sharp economic slowdown or possibly a recession.

Saunders warned that high inflation eroded the BoE’s ability to loosen monetary policy during future downturns.

“That credibility is not infinite and cannot be taken for granted,” he said.

As well as the inflationary pressures hitting many other global economies, Britain also had to contend with the fallout from its departure from the European Union and its single market which had hurt investment and productivity, he said.

He also said the neutral rate of interest – the level at which it neither stimulates nor restrains demand – might be somewhere in the range of 1.25% to 2.5%.

Replying to a question after his speech, Saunders said financial markets were pricing that kind of range for Bank Rate over the next five years and he was inclined think that was suitable for estimating the neutral rate.

Saunders voted for a 50 basis-point rate hike in February as well as last week but backed a 25 basis-point increase in March. He told reporters that his May decision was based on the calmer conditions in financial markets at that point.

(Reporting by David Milliken and William Schomberg; Editing by Hugh Lawson)

By Brenna Hughes Neghaiwi

ZURICH (Reuters) -Lawmakers blocked a bid to overhaul strict Swiss banking secrecy rules on Friday in a blow to freedom of information advocates seeking an exemption for journalists and whistleblowers.

Switzerland has been under fire over its press freedom rules after a law introduced in 2015 led a leading media group, Tamedia, to bow out from an international investigation into a trove of Credit Suisse client data, published by a consortium of journalists in February as the “Suisse Secrets”.

A parliamentary committee said it had struck down two motions seeking to overhaul the bank secrecy rule that has drawn U.N. criticism, which would have tasked the government with “reversing the threat to press freedom and the protection of journalists and whistleblowers” that had resulted from it.

“From the point of view of the majority of the committee, there is no need for legislative action because Swiss banks have developed considerably in recent years with regard to the prevention of money laundering and other white-collar crime,” the Economic Affairs and Taxation Committee said in a statement.

It added, without elaborating, that a change of law would run the risk of “encouraging public prejudgments against private individuals”.

Introduced in 2015, the addition to Article 47 of Switzerland’s Banking Act states that anyone who discloses to “additional persons” information originally obtained from an employee or entity working for a bank in violation of bank secrecy can be punished by up to three years imprisonment or a fine.

UN Special Rapporteur for Freedom of Opinion and Expression Irene Khan wrote to Bern in March to voice concern that there were no explicit exemptions for journalists or whistleblowers.

“This paralyses freedom of expression and media freedom, as well as impeding the free flow of information,” she wrote in a letter seen by Reuters.

Switzerland’s Ambassador to the United Nations in Geneva said in a reply on April 29 that he was unaware of any recent legal action against journalists and said Bern recognised the importance of media freedom, citing its protection in the country’s constitution.

He added that Switzerland is in the process of developing a national action plan for journalists’ safety.

While the law had seen little public testing to date, it became hotly debated after a consortium of foreign media outlets reported Credit Suisse managed accounts for human rights abusers, fraudsters and businessmen who had been placed under sanction in the so-called “Suisse Secrets”. Credit Suisse denied wrongdoing.

Swiss media group Tamedia declined participation in the project, kickstarted when one person leaked information on the Credit Suisse accounts to Germany’s Sueddeutsche Zeitung, saying the legal consequences would have been “unforeseeable”.

“In no other democratic country is it a crime to report on such accounts, as long as the revelations are in the public interest,” heads of Tamedia’s research desks wrote in an article on Feb. 20.

Tamedia’s editor in chief called it a “disgrace” that foreign journalists had to step in to do the work, calling for an urgent repeal of the relevant law.

“I clearly see this is as a missed opportunity,” Green party committee member Franziska Ryser told Reuters after the decision.

Ryser said she hoped parliament might now correct the law in wider deliberations, “so that Swiss journalists don’t abstain from such investigations in the future.”

The debate comes amid similar discussions in Britain, where a Supreme Court decision in February was said to have far-reaching consequences for media reporting.

(Reporting by Brenna Hughes Neghaiwi; additional reporting by Emma Farge, Editing by William Maclean)

(Reuters) -The Russian rouble dropped sharply on Friday, pulling back from a more than two-year high against the euro as the spectre of more sanctions against Moscow hung over markets ahead of a second consecutive long holiday weekend.

The European Union’s executive on Wednesday proposed the toughest package of sanctions yet against Russia for its actions in Ukraine, but several countries’ worries about the impact of cutting off Russian oil imports stood in the way of agreement.

By 1201 GMT, the rouble had lost 4.7% to trade at 73.45 versus the euro, falling sharply from its strongest point since February 2020 of 69.1250.

The rouble was 3.8% weaker against the dollar at 69.52 , not too far from a more than two-year high of 65.3125 hit on Thursday.

The rouble has rallied in the past few weeks thanks to mandatory conversion of foreign currency by export-focused companies. Also, there has been weak demand for dollars and euros amid waning imports and restrictions on cross-border transactions.

“It looks like the rouble has found a new equilibrium point around 67, at least for the time being,” said Sberbank CIB analysts in a note. “However, we think the local currency may begin to strengthen again when we come out of the May holidays next week, with exporters gradually beginning to step up their offers of hard currency.”

They said the rouble could strengthen to 60 against the greenback by the end of the month.

SberCIB Investment Research’s Yuri Popov expects the rouble to trade at 75 to the dollar at year-end, improving his forecast from April of 85.

Moves in the rouble are sharper than usual as market liquidity has been thinned by central bank restrictions designed to prop up financial stability after Russia sent tens of thousands of troops into Ukraine on Feb. 24.

Meanwhile, trading activity is subdued as the markets are open for only three days this week in the middle of Russia’s long May holidays.

Brent crude oil, a global benchmark for Russia’s main export, was up 1.7% at $112.8 a barrel.

Russian stock indexes were down.

The dollar-denominated RTS index was 3.7% lower at 1,078.1 points. The rouble-based MOEX Russian index was down 1% at 2,381.6 points.

Promsvyazbank analysts said they expected equity markets to drop ahead of another long holiday weekend.

(Reporting by ReutersEditing by Frank Jack Daniel, Mark Potter and Chizu Nomiyama)

By Carolyn Cohn

LONDON (Reuters) – U.S. stock futures were indicating a lower open on Friday following a slide in the previous session on U.S. rate hike expectations, though the rate outlook briefly drove the dollar to its highest in 20 years.

Asian stocks fell on worries about the hit to growth from China’s zero-COVID policy.

The U.S. currency was finding favour after the Federal Reserve raised rates by 50 basis points this week. The market is pricing in a more than 90% chance of a 75 bps hike in June, according to Refinitiv data.

U.S. payrolls data due later on Friday will help traders gauge the strength of the U.S. economy. Economists polled by Reuters predicted the data would show the United States created 391,000 new jobs in April, versus 431,000 a month earlier.

“The trend is still for a strong and very tight labour market, which is feeding into wage increases and is an issue for inflation longer term,” said Gergely Majoros, a member of the investment committee at asset manager Carmignac. This made it hard for the Fed to keep prices stable, he added. “Job creation is still too hot for the Fed to achieve its mandate.” U.S. stock index futures dropped 0.29% after the Dow Jones Industrial Average and the S&P 500 both slid more than 3% overnight, and the Nasdaq Composite shed 4.99% in its biggest single-day plunge since June 2020. [.N] European stocks fell 1.14% to their lowest since mid-March and were heading towards their worst week in two months. Britain’s FTSE dropped 0.73%.

MSCI’s world equity index fell 0.35%, approaching its lowest since Feb 2021. The dollar hit a 20-year high of 104.06 against an index of currencies before trimming gains.

It rose 0.17% to 130.34 yen, also close to its highest in 20 years. The euro rose 0.45% to $1.0584, however.

The European Central Bank should raise its deposit rate back into positive territory this year, French central bank chief Francois Villeroy de Galhau said on Friday, comments that point to his support for at least three rate hikes in 2022. Sterling fell to its lowest against the dollar in nearly two years after dropping 2.2% on Thursday. The Bank of England raised rates by 25 basis points on Thursday as expected, but two policy makers expressed caution about rushing into future rate hikes. Bond yields are also rising on expectations of a fast pace of rate hikes. The yield on U.S. 10-year notes was last 3.0828% after crossing 3.1% overnight for the first time since November 2018. [US/] Germany’s 10-year government bond yield rose to 1.082%, its highest since 2014.

“We see the Ukraine war reducing global growth and increasing inflation, mostly via higher energy costs,” BlackRock analysts said. MSCI’s broadest index of Asia-Pacific shares outside Japan shed 2.69% and hit its lowest level since March 16, the day when Chinese vice premier Liu He boosted shares by pledging to support markets and the economy. The benchmark is down 4% from last Friday’s close, which would be its worst week since mid-March. Japan’s Nikkei bucked the trend, rising 0.69% on its return from a three-day holiday. Chinese blue chips lost 2.53%, the Hong Kong benchmark fell 3.89% and China’s yuan tumbled to an 18-month low in both onshore and offshore markets. China will fight any comments and actions that distort, doubt or deny the country’s COVID-19 response policy, state television reported on Thursday, after a meeting of the country’s highest decision-making body. Investors said that appeared to rule out any easing in the zero-COVID policy, which is slowing Chinese economic growth and snarling global supply chains. “The silver lining is the expectation that new Chinese fiscal measures could come out over the weekend,” said Dickie Wong, director of research at Hong Kong brokerage Kingston Securities. Oil prices climbed for a third straight session, shrugging off concerns about global economic growth as impending European Union sanctions on Russian oil raised the prospect of tighter supply. Brent futures jumped 2.16% to $113.25 a barrel. U.S. crude climbed 2% to $110.41 a barrel. [O/R]

Gold gained 0.36% to $1883.63 an ounce. [GOL/]

(Additional reporting by Alun John in Hong Kong and Sujata Rao in London; Editing by Andrew Heavens and Chizu Nomiyama)

By Herbert Lash and Marc Jones

NEW YORK/LONDON (Reuters) – U.S. Treasury yields rose and a gauge of global equity markets slumped on Thursday, erasing much of the prior day’s relief rally, as investors worry central banks around the world need to aggressively tackle high inflation as growth slows.

A sharp decline on Wall Street snuffed a rally in European stocks as fears of a recession, as the Bank of England suggested after it hiked rates, squashed enthusiasm from Federal Reserve Chair Jerome Powell’s remarks on Wednesday. He said policymakers were not considering 75 basis-point moves in the future.

The yield on 10-year Treasury notes rose 16.9 basis points to 3.084%, while inflation-hedge gold bounced higher after Powell also emphasized risks to the economy from soaring inflation.

“It’s a very messy environment for investors right now,” said Anthony Saglimbene, global market strategist at Ameriprise Financial. “There’s an overall negative sentiment in the market.”

Markets will remain volatile until there is a clear picture on Fed rate policy and its trajectory later this year, he said.

Investors are “worried that when we get to the back half of this year, the Fed is going to be so aggressive with raising interest rates that they’re going to take the economy into a recession.”

MSCI’s gauge of stocks across the globe shed 2.31% and the pan-European STOXX 600 index lost 0.82%.

On Wall Street, the Dow Jones Industrial Average fell 2.63%, the S&P 500 lost 3.09% and the Nasdaq Composite dropped 4.32%.

Britain’s pound and government bond yields fell sharply after the BoE raised rates to their highest since 2009 and warned the UK economy was at risk of recession.

Sterling was last at $1.2352, down 2.13% on the day, while the euro was down 1.01% to $1.0514 after dire German industrial orders data.

“The German economy is programmed for a downturn,” said Thomas Gitzel, chief economist at VP Bank.

“The war in Ukraine, the supply chain problems and high rates of inflation are spoiling companies’ appetite for investment,” he said, adding that a recession was becoming increasingly likely.

The dollar index rose 1.131%, rebounding after falling sharply on Wednesday following the Fed’s rate hike. It is up more than 7% so far this year. [/FRX]

China’s battered shares recovered some ground, gaining 0.7% as mainland markets resumed trade after a three-day holiday.

Investors also cheered a pledge by China’s central bank for more monetary policy support to help businesses badly hit by the latest COVID-19 outbreak.

Oil prices rose as a stronger dollar offset supply concerns after the European Union’s plans for new sanctions against Russia, including an embargo on crude in six months. Traders noted OPEC+ again rebuffed consumer calls for a faster pace of output rises.

U.S. crude was last up 0.89% to $108.77 per barrel and Brent was at $111.48, up 1.22% on the day.

(Reporting by Herbert Lash, additional reporting by Marc Jones in London; editing by Chizu Nomiyama, Alexandra Hudson and Susan Fenton)

By David Milliken, William Schomberg and Andy Bruce

LONDON (Reuters) -The Bank of England sent a stark warning that Britain risks a double-whammy of a recession and inflation above 10% as it raised interest rates on Thursday to their highest since 2009, hiking by quarter of a percentage point to 1%.

The pound fell by more than a cent against the U.S. dollar to hit its lowest level since mid-2020, below $1.24, as the gloominess of the BoE’s new forecasts for the world’s fifth-largest economy caught investors by surprise.

They also trimmed bets on the central bank hiking rates aggressively this year. Short-dated British government bond yields slid sharply.

The BoE’s nine rate-setters voted 6-3 for the rise in Bank Rate from 0.75%, with Catherine Mann, Jonathan Haskel and Michael Saunders calling for a bigger increase to 1.25%.

Economists polled by Reuters had forecast an 8-1 vote to raise benchmark borrowing costs to 1%, with one policymaker opposing a hike.

Central banks are scrambling to cope with a surge in inflation that they described as transitory when it began with the post-pandemic reopening of the global economy, before Russia’s invasion of Ukraine sent energy prices spiralling.

The BoE said it was also worried about the impact of renewed COVID-19 lockdowns in China which threaten to hit supply chains again and add to inflation pressures.

But policymakers around the world are also trying to avoid sending their economies into a slump.

“It is a very weak projection, a very sharp slowdown,” BoE Governor Andrew Bailey told reporters.

“There’s a technical definition of a recession it doesn’t meet – but put that to one side – it is a very sharp slowdown in activity.”

On Wednesday, the U.S. Federal Reserve raised rates by a half-point to a range of 0.75-1.0%, its biggest increase since 2000. Chair Jay Powell said more such hikes were on the table.

But Powell said the U.S. economy was performing well, a contrast with Bailey’s more downbeat assessment.

The BoE’s rate rise was its fourth since December, the fastest pace of policy tightening in 25 years.

The BoE said most policymakers believed “some degree of further tightening in monetary policy may still be appropriate in the coming months”. It dropped the word “modest” to describe the scale of rate hikes ahead.

A split emerged, with two members saying the guidance was too strong given the risks to growth.

“The new forecasts, taken together with the increasing division among committee members, suggest the Bank is getting closer to a pause in its tightening cycle,” said ING economist James Smith.

Suren Thiru, head of economics at the British Chambers of Commerce, said the rate hike and deteriorating outlook would cause “considerable alarm among households and businesses”.

INFLATION TO TOP 10%

British consumer price inflation hit a 30-year high of 7% in March, more than triple the BoE’s 2% target, and the central bank revised up its forecasts for price growth to show it peaking above 10% in the last three months of this year.

It had previously predicted a peak of about 8% in April.

The BoE said British inflation would peak later than in other big advanced economies due to a cap on household energy tariffs. Fuel bills jumped by 54% in April and the BoE now sees a further 40% increase in October, hitting the economy.

Real post-tax household disposable income – a measure of living standards – is forecast to fall 1.75% this year, the biggest calendar-year drop since 2011 and the second-biggest since the BoE’s records began in the 1960s.

Voters in local government elections on Thursday are expected to punish Prime Minister Boris Johnson over the cost-of-living crisis and for breaking his own COVID lockdown rules.

Bailey said inflation would most hurt “those with least bargaining power and those who are often least well off”, describing that impact as “a great concern”.

The BoE kept its forecast for economic growth this year at 3.75%, but slashed its forecast for 2023 to show a contraction of 0.25% from a previous estimate of 1.25% growth. It cut its growth projection for 2024 to 0.25% from a previous 1.0%.

While growth in the first three months of this year has been stronger than the BoE predicted, it expects the economy to stagnate in the second quarter, due to an extra public holiday and reduced COVID testing. It sees a nearly 1% fall in GDP in the final quarter as the next energy price rise kicks in.

Those forecasts were based on bets in financial markets that the BoE would increase rates to about 2.5% by the middle of next year, which the central bank signalled was probably too much.

It said it expected inflation would fall to 1.3% in three years’ time, based on market pricing for interest rates, as higher unemployment and the cost-of-living squeeze hit the economy. That would be the biggest undershoot relative to its 2% target since the 2008-09 global financial crisis.

The BoE also said it would work on a plan to start selling the government bonds it has bought since that crisis, which currently stand at just under 850 billion pounds ($1.05 trillion).

BoE staff would update the Monetary Policy Committee on the plan at its August meeting which would “allow the Committee to make a decision at a subsequent meeting on whether to commence sales”.

($1 = 0.8067 pounds)

(Additional reporting by Andy Bruce Writing by William SchombergEditing by Catherine Evans)

By Karen Brettell

NEW YORK (Reuters) – The dollar fell against a basket of currencies on Wednesday ahead of the outcome of a Federal Reserve meeting, as investors evaluated how much expected U.S. central bank hawkishness is already priced into the greenback.

The Fed is expected to hike rates by 50 basis points, which would be the largest increase in two decades, and announce plans to reduce its $9 trillion balance sheet as it tackles inflation rising at the fastest pace in 40 years.

Comments by Fed Chairman Jerome Powell at the conclusion of the meeting will be scrutinized for signals on how the U.S. central bank will balance the need to stem rising price pressures against weakening growth if the economy stutters.

“Chair Powell’s post-decision press conference will be key. If he shows any hints of dovishness, markets will take yields and the dollar lower,” Win Thin, global head of currency strategy at Brown Brothers Harriman, said in a report.

“That said, we see no reason for Powell to hedge his bets right now and so we expect full speed ahead from the Fed,” he added.

The dollar index was last at 103.24, down 0.16% on the day. It reached 103.93 on Thursday, the highest since Dec. 2002.

Fed funds futures traders are pricing for the Fed’s benchmark rate to increase to 2.96% by year-end, from 0.33% now.

The Fed is expected to take a more hawkish approach to monetary policy than its peers, with Europe struggling from weaker growth and energy disruptions due to sanctions imposed on Russia after its invasion of Ukraine.

The EU proposed its toughest sanctions yet against Russia on Wednesday, including a phased oil embargo.

The euro rose to $1.0551, up 0.30%, after dropping to $1.0470 on Thursday, the lowest since January 2017.

The U.S. dollar has also benefited from safe-haven flows as COVID-19 restrictions in China trigger concerns about global growth and new supply chain disruptions.

Beijing shut scores of metro stations and bus routes and extended COVID-19 curbs on many public venues on Wednesday, focusing efforts to avoid the fate of Shanghai, where millions have been under strict lockdown for more than a month.

The Aussie dollar outperformed for the second day, after the Reserve Bank of Australia on Tuesday raised its cash rate by a surprisingly large 25 basis points to 0.35%, the first hike in over a decade, and flagged more to come as it pulls down the curtain on its massive pandemic stimulus.

The Aussie gained 0.63% to $0.7141.

========================================================

Currency bid prices at 9:32AM (1332 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 103.2400 103.4400 -0.16% 7.921% +103.6000 +103.1700

Euro/Dollar $1.0551 $1.0519 +0.30% -7.20% +$1.0556 +$1.0507

Dollar/Yen 129.9400 130.1300 -0.17% +12.85% +130.2000 +129.8000

Euro/Yen 137.11 136.92 +0.14% +5.21% +137.1200 +136.7200

Dollar/Swiss 0.9816 0.9788 +0.29% +7.62% +0.9819 +0.9784

Sterling/Dollar $1.2516 $1.2496 +0.16% -7.45% +$1.2537 +$1.2469

Dollar/Canadian 1.2823 1.2842 -0.14% +1.42% +1.2842 +1.2805

Aussie/Dollar $0.7141 $0.7096 +0.63% -1.77% +$0.7151 +$0.7089

Euro/Swiss 1.0355 1.0295 +0.58% -0.14% +1.0356 +1.0285

Euro/Sterling 0.8428 0.8418 +0.12% +0.33% +0.8433 +0.8404

NZ $0.6446 $0.6436 +0.19% -5.79% +$0.6462 +$0.6423

Dollar/Dollar

Dollar/Norway 9.3810 9.4000 -0.37% +6.31% +9.4265 +9.3650

Euro/Norway 9.8988 9.8823 +0.17% -1.14% +9.9179 +9.8673

Dollar/Sweden 9.8539 9.8606 +0.19% +9.27% +9.9010 +9.8453

Euro/Sweden 10.3979 10.3779 +0.19% +1.60% +10.4093 +10.3750

(Additional reporting by Sujata Rao in London; Editing by Hugh Lawson)