Illustration shows U.S. dollar banknotes
U.S. dollar banknotes are displayed in this illustration taken, February 14, 2022. Reuters

The dollar headed on Thursday for its longest losing streak in 2-1/2 years after the U.S. Federal Reserve sounded close to calling time on interest rate hikes, while the Swiss National Bank and Bank of England pushed ahead with further rate increases.

The Fed raised its benchmark funds rate by 25 basis points, as expected on Wednesday, but dropped language about "ongoing increases" being needed in favor of "some additional" rises, as it watches how wobbling confidence in banks affects the economy.

Futures imply around a 50% chance of one more quarter-point hike, in contrast to Europe where markets see around 50 bps of further tightening.

The gap sent the euro surging to a seven-week high of $1.0930, having also risen for six straight sessions. It was last at $1.08850.

The Fed's hike in interest rates was particularly notable given that financial markets have been roiled by wavering confidence in banks globally following a run on Silicon Valley Bank two weeks ago and the sudden demise of Credit Suisse, said Juan Perez, director of trading at Monex USA.

Fed Chair Jerome Powell said on Wednesday that deposit flows have stabilized in the last week.

"There seems to be not necessarily a lot of flight to safety," said Perez. "It's actually more like there's a sense that if the banking world is doing okay, and the banking world is going to be bailed out every time it seems to be in trouble, that things in general are going to survive and be fine," he said.

The dollar index, which measures the currency against six major peers, was last down 0.166% at 102.250, on track for its sixth straight daily drop, its longest such streak since September 2021.

The shift in tone from the Fed makes it less likely that markets go back to worrying that strong economic data drives rates higher, NatWest Markets head of G10 FX strategy Brian Daingerfield said.

"From the foreign exchange perspective, we think that argues for further dollar weakness as the ceiling for the Fed cycle has clearly come down," he said.

The Bank of England raised borrowing costs by 25 bps on Thursday, in line with expectations, and said further tightening would be required if there were evidence of more persistent price pressures.

Sterling gained 0.24% against the dollar to $1.2299, after earlier touching a seven-week high of $1.2341.

The Swiss National Bank (SNB) also raised its policy rate by 50 basis points as the central bank sought to balance tackling inflation with concerns about financial market turmoil, while it reiterated it was willing to be active in the foreign exchange market.

The SNB said measures announced by authorities at the weekend regarding Credit Suisse had "put a halt to the crisis".

The dollar fell against the franc after the decision and was last down 0.31% against the dollar at 0.915.

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Currency bid prices at 10:43AM (1443 GMT)

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

Previous Change

Session

Dollar index 102.2600 102.4400 -0.17% -1.189% +102.4600 +101.9100

Euro/Dollar $1.0885 $1.0856 +0.28% +1.59% +$1.0930 +$1.0854

Dollar/Yen 131.2850 131.5000 -0.17% +0.13% +131.6550 +130.4150

Euro/Yen 142.90 142.67 +0.16% +1.85% +143.1900 +142.2000

Dollar/Swiss 0.9147 0.9175 -0.31% -1.08% +0.9180 +0.9120

Sterling/Dollar $1.2298 $1.2269 +0.24% +1.70% +$1.2343 +$1.2266

Dollar/Canadian 1.3645 1.3732 -0.64% +0.70% +1.3733 +1.3632

Aussie/Dollar $0.6713 $0.6685 +0.41% -1.53% +$0.6755 +$0.6682

Euro/Swiss 0.9956 0.9957 -0.01% +0.62% +0.9997 +0.9938

Euro/Sterling 0.8849 0.8847 +0.02% +0.06% +0.8865 +0.8822

NZ $0.6276 $0.6222 +0.89% -1.14% +$0.6294 +$0.6221

Dollar/Dollar

Dollar/Norway 10.3270 10.4500 -1.16% +5.25% +10.4620 +10.3220

Euro/Norway 11.2385 11.3537 -1.01% +7.10% +11.3675 +11.2361

Dollar/Sweden 10.2927 10.3068 +0.08% -1.11% +10.3326 +10.2175

Euro/Sweden 11.1998 11.1908 +0.08% +0.45% +11.2360 +11.1536