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The dollar held at a nine-day high on Thursday, bolstered by concern U.S. inflation pressures will pick up, although worries about an escalation in trade conflict capped gains. The conventional wisdom is that any escalation in trade conflict between the United States and its trading partners will feed through to inflation and prompt the U.S. Federal Reserve to raise interest rates at least twice more this year. But market watchers fear the dollar may have peaked for now. With the stimulus effect from U.S. tax cuts expected to wane next year and worries that the trade war rhetoric may fuel a selloff in global stock markets, some analysts advise caution in buying the dollar at these levels. "If stocks drop sharply then the Fed will pause and moreover, we think the U.S. is toward the end of its rate hike cycle," said Thu Lan Nguyen, an FX analyst at Commerzbank (DE:CBKG) in Frankfurt. Having raised interest rates seven times since December 2015 to 2 percent, markets expect three or four rate hikes by the end of 2019. But despite the widening interest rate differentials in favor of the dollar -- spreads between 10-year U.S. Treasuries and equivalent German Bunds are near 30-year highs at 2.59 percent -- the dollar has failed to power ahead in recent days, notably against the euro.

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