The dollar index rose today, hitting a seven-week high. It looks like the Fed will continue to raise US interest rates for a longer period. A strong data set showed that the US economy remains resilient. That means the agency has more room to increase rates.
The dollar index jumped 0.2% to 104.80 against the basket of six major currencies, soaring to its highest level since January 6. He stayed on his way to a fourth straight weekly gain. Overall, the dollar soared 2.5% in February.
Simon Harvey, Monex’s head of currency research, noted that the US currency soared to its fourth straight week of gains and shows how much the positive data changed market sentiment.
On the other hand, the Japanese yen tumbled, suffering in a volatile Asian session. The incoming Governor of the Bank of Japan, Kazuo Ueda, announced that the bank should maintain its ultra-loose monetary policy, which is so frustrating for investors. The yen fell 0.45% to 135.29 to the dollar. However, it shot up to its highest level since the previous Monday in Asian business hours.
Charu Chanana, the market strategist at Saxo Markets in Singapore, said Ueda’s neutral comments could send the Japanese currency back on a weakening trend.
In Europe, the common currency decreased 0.1% against the dollar, finally changing to $1.0583. At the same time, sterling was shed 0.27% against the dollar at $1.1985.
How are emerging market currencies trading today?
Asian currencies were dovish today. They seemed poised for weekly losses as the dollar held strong. The Chinese yuan fell to a seven-week low as investors worried about tense Sino-US relations.
Malaysia’s ringgit fell 2.3% on Friday. It looked headed for its biggest weekly drop since the start of the coronavirus pandemic. Meanwhile, the Singapore dollar shaved 0.6%. He also headed for his fourth straight weekly loss.
During this week, the Thai baht plunged 0.8%. An additional 0.6% was shaved off today. The South Korean won also lost the same amount. On the other hand, the Philippine peso rallied. It was the only currency in the region that traded in the green, up 0.3%.
Barclays analysts said resilient global economic growth should boost some emerging market currencies. However, expectations of further hikes by the Federal Reserve, as well as the consequent increase in rate volatility, have weighed on currencies. On Friday, the Chinese yuan also fell 0.3%.