Dollar nears 20-year peak ahead of US employment data

The dollar is set to post a third straight week of gains, approaching a 20-year high against other major currencies, with investors focused on US jobs data to be released later on Friday which could reinforce the trend of big interest rate hikes.

The US currency has been rising since Federal Reserve Chairman Jerome Powell announced in Jackson Hole, Wyoming, last Friday that interest rates were needed to remain high “for some time” to rein in inflation.

The dollar index, which measures the performance of the US currency against six other currencies, rose to a new peak it did not reach in two decades at 109.99, led by strong US economic data showing a decline in unemployment claims.

The index’s strength declined in morning trading on European stock exchanges on Friday, falling 0.2 percent to 109.43. However, the index is still on track to rise about 0.5% this week.

Analysts said the US non-farm payrolls data due to be released at 1230 GMT will be closely watched. Economists expect 300,000 jobs to be added in August.

The dollar rose above 140 yen for the first time since 1998 on Thursday, and the yen hit a new low of 140.43 per dollar on the same day.

On Friday, Japanese Finance Minister Shun Suzuki said that the government would take the necessary “appropriate” action.

The euro recouped some of its losses on Thursday against the dollar, and slowly returned to parity with the greenback, rising a third of a percentage point to $0.99780.

The European Central Bank meets next week, with markets betting on an unprecedented hike in interest rates by 75 basis points.

The pound was largely stable on Friday against the dollar at 1.15520 to the dollar, to continue the week, declining nearly 1.5 percent.