As investors braced for aggressive Federal Reserve rate hikes and a possible recession, the U.S. dollar achieved a fresh 20-year high on Tuesday.

Markets have scrambled to price in steeper hikes after the U.S. inflation reading on Friday.

The Fed is expected to hike rates 75 basis points on Wednesday, marking the biggest hike in nearly three decades.

The dollar surged as stocks and bonds tumbled overnight, hitting one-month highs against the euro,

Australian dollar, New Zealand dollar, Swiss franc and Canadian dollar.

Early in Asia trade, the U.S. dollar index climbed to a two-decade high of 105.29. 

The euro traded at its overnight low of $1.0405, while the Australian dollar held steady at $0.6943.

Sterling hit a two-year low of $1.2109 overnight and held near that level on Tuesday.

Kit Juckes, Societe Generale strategist, said the market over-invested in the idea that inflation has peaked.

The Fed does not know how much monetary tightening it needs, and will only discover that it has done too much after the fact."

Futures anticipate nearly 200 basis points of tightening by September, and the two-year Treasury yield is up

about 60 basis points since Thursday's close to 3.3982% as traders prepare for sharp rate hikes.

With a 10-year yield of 3.3770%, investors are concerned that the rapid tightening path will hurt growth and possibly spark a recession.

Best opportunity For You Swipe Up 

Swipe Up