The US dollar index on Friday posted its largest weekly percentage gain in a month, supported by the prospect of a more aggressive pace of US Federal Reserve tightening to curb soaring inflation.
The index also advanced to 100 for the first time in nearly two years. It rose as high as 100.19, its highest since May 2020. It was last little changed on the day at 99.822, and was up 1.3 percent on the week.
The greenback gained ground against a basket of six currencies over the past month, particularly versus the euro, which has been pressured by investor concerns about the economic costs of the war in Ukraine and a potentially nail-biting presidential election in France.
Photo: Reuters
Capital Economics senior markets economist Jonas Goltermann said that “the Fed’s hawkish message on quantitative tightening, renewed sanction risks in Europe and the polling shift in favor of far-right candidate Marine Le Pen ahead of France’s presidential election has put pressure on risk sentiment, especially in Europe.”
This week’s release of the minutes of the Fed’s meeting last month showed that “many” participants were prepared to raise rates in 50-basis-point increments in the coming months.
On the other side of the US dollar’s rally, the euro dropped to a one-month low of US$1.0837. It closed down 0.04 percent at US$1.0876. The euro has fallen in seven straight sessions.
Meeting minutes from the European Central Bank published on Thursday suggested that its policymakers are keen to act to combat inflation, but the eurozone has so far taken a more cautious tack than other central banks, weakening the euro.
“ECB minutes presented little in contrast to recent comments by policymakers, though the sense is that the bank is merely awaiting data over the coming months showing the impact of higher energy prices and the war in Ukraine to decide when to hike first — whether it’s in Q3 or Q4,” Shaun Osborne, chief FX strategist at Scotiabank in Toronto, wrote in a research note.
“In either scenario, we don’t anticipate more than 50 basis points in tightening from the ECB this year, which is only as much as the Fed is set to roll out in one meeting, next month,” he said.
A tightening election race in France between French President Emmanuel Macron and far-right candidate Le Pen has added pressure on the euro, raising investor concerns about the future direction of the eurozone’s second-biggest economy. Macron is still ahead in polls.
Meanwhile, the New Taiwan dollar shrank against the US dollar on Friday, losing NT$0.078 to close at NT$28.906, down 0.7 percent from NT$28.705 a week earlier. Turnover totaled US$1.251 billion during the trading session.
The US dollar rose against the Japanese yen, hitting ￥124.67, its highest in more than a week and approaching last month’s near seven-year high of 125.1. It closed up 0.27 percent at ￥124.3 and 1.44 percent higher on the week.
The yen has steadied this month after tumbling last month, but remains under pressure as the US raises interest rates and the Bank of Japan intervenes in the bond market to keep rates low.
Sterling lost ground versus the US dollar, declining 0.31 percent to US$1.3034.
Additional reporting by CNA, with staff writer
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