The US dollar hit a new high on Friday. What about the yen?

The US dollar rose on Friday. It shot up to a six-week high against a basket of six major currencies. Various reports showed that the US economy remains strong. Such news encouraged the markets. Investors believe that the Fed could continue to raise interest rates.

Data on Thursday showed that the number of US citizens filing new claims for unemployment benefits dropped sharply in the past week. This was unexpected. Another data source reported that in January, monthly producer prices rose to the highest in seven months. Consequently, the dollar rose, while the euro, sterling and yen ended up in the red.

The US dollar index soared to a six-week high of 104.44 against the basket of currencies. It changed hands higher by 0.28% to 104.40 at last, poised for a third straight week of gains.

Meanwhile, the common currency plunged 0.34% to $1.0635. The Euro touched its fresh low at $1.0632 earlier in the session today before rallying slightly. At the same time, the British pound slumped 0.32% to $1.1949.

Tina Teng, a market analyst at CMC Markets, noted that recent data shows that the US economy is still quite healthy. It probably won’t go into a recession anytime soon. As a result, traders are now quoting higher rates for longer periods.

Earlier this week, data showed that US retail sales were strong in January. However, inflation persists. Therefore, investors feared that the Fed would have to raise rates more than analysts had previously expected. The problem was that it could cause a recession if the US economy wasn’t strong enough. But the new reports allay those fears.

How are the Australian and New Zealander doing?

The riskier Australian dollar fell more than 0.6% to $0.68325 today. The currency was at its lowest level since Jan. 6 as traders flocked to stronger dollars. The New Zealand dollar also struggled. It plunged to $0.6216, hitting a six-week low.

In addition, the dollar gained against the Japanese yen, adding 0.6%. It changed hands in a one-month high of 134,815 at last. Overall, the USD/JPY pair gained around 2.5% this week. The Japanese authorities finally decided that academic Kazuo Ueda would become the next governor of the BOJ. He will succeed the current governor in April.

On Friday, Finance Minister Shunichi Suzuki said Ueda would help keep inflation on target, as well as sustain wage increases and economic growth. Jane Foley, Rabobank’s head of currency strategy, also noted that Governor-designate Ueda’s most important task would be to guide the central bank out of his ultra-easy policy. However, the BOJ is in no rush to change its stance.

What about emerging market currencies?

Asian emerging currencies continued to trade in a bear market today. Some of them started the year with substantial profits. However, as the dollar rises, most emerging market currencies are moving into red territory.

On Friday, the Malaysian ringgit suffered the most. It plummeted 0.6%. The coin almost hit a one-month low. Overall, it has shed 2.3% this week, experiencing its steepest drop since the coronavirus pandemic began.

The Singapore dollar fell 0.2% today. Meanwhile, the Indian rupee fell 0.1%. Both currencies hit their lowest levels since Jan. 6.

Two Fed officials said today that the agency should have raised interest rates more than it did in early February. These comments weighed on investor sentiment.

ANZ analysts noted that the rally in emerging markets stalled as traders feared the US central bank would continue raising rates for an extended period. However, analysts believe that these concerns are not enough to keep emerging market currencies in the red for the long term.

However, on Friday, the Thai baht plunged 0.4%. The new data showed that Thailand’s economy grew by just 1.4% in the October-December period year-on-year. A decline in manufacturing and exports caused such drawbacks.

Economists expected a year-on-year increase of 3.5%. However, the economy contracted on a quarterly basis. This news surprised the markets and pushed the baht lower.

Poon Panichpibool, the market strategist at Krung Thai Bank, noted that the GDP reading was much weaker than markets expected. Some foreign investors may consider reducing their long positions or taking profits. Considering that forex gains have decreased by 50% due to the sharp fall in the baht, that is very possible.