On Wednesday, the Fed raised interest rates by 25 basis points and said it had reached an inflection point in the fight against inflation, leading investors to assess a slowdown in the pace of rate hikes in the future.
However, a surprising US nonfarm payrolls number on Friday, coupled with a rebound in the service industry in January, sent the dollar to a high not seen since mid-January, with investors estimating the benchmark rate of the Federal Reserve at a high of 5.05% in June.
The dollar index, which measures the greenback’s performance against a basket of six currencies, hit a three-week high of 103.25 on Monday and was trading up 0.23% at 103.36 at 1054 GMT. The index gained 1.1% on Friday.
Another factor driving the dollar’s safe-haven appeal was escalating tension between the United States and China after a US military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday.
The euro was down 0.2% to hit a nearly three-week low of $1.0769. The single currency rose to a 10-month high on Thursday after the European Central Bank raised its interest rate to 2.5% and promised a 50 basis point hike in March.
The yen weakened after the Nikkei newspaper reported, citing anonymous government and ruling party sources, that Lieutenant Governor Masayoshi Amamiya was offered the job of Bank of Japan governor.
At a press conference on Monday, Deputy Chief Cabinet Secretary Yoshihiko Isozaki said there was no truth to the Nikkei report. The yen was down 0.5% at 131.90 per dollar, having hit a three-week low of 132.60 earlier in the session.
Source: Ambito
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