LONDON—The dollar index held near 16-month highs on Tuesday after Federal Reserve Chair Jerome Powell was picked for a second term, reinforcing market expectations that U.S. interest rates will rise in 2022. Currency markets have been mostly driven in recent months by market perceptions of the different paces at which global central banks reduce pandemic-era stimulus and raise rates. “Markets are taking every USD strength story they can get in this environment, which is visible in the moves after Powell’s widely expected reappointment,” said Ima Sammani, FX market analyst at Monex Europe. Sammani said the dollar strength was also due to rising front-end U.S. yields, which was likely caused by commentary from Federal Reserve policymakers. They include Atlanta Federal Reserve President Raphael Bostic, who said on Monday that speeding up the tapering of asset purchases could give the Fed more room for rate hikes in 2022. Commerzbank’s head of FX …


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