Dollar holding on to gains

The dollar stabilized on Friday after rising in the previous session, as traders analyzed a raft of central banks’ interest rate hikes and the possibility of continuing to raise borrowing costs for an extended period.

And the euro settled against the dollar at 1.063 dollars. This came after falling 0.5 percent on Thursday after the European Central Bank raised interest rates, indicating that the hike is far from over. This raised concerns about potential damage to the global economy and pushed investors towards the dollar as a safe haven.

Federal Reserve Chairman Jerome Powell said on Thursday that policymakers expect interest rates to rise further and to remain high for longer.

The “hawkish” statements of central banks prompted dealers to reconsider their bets that the damage caused by high interest rates may end soon. This led to a massive sell-off in global stocks and European bonds on Thursday and Friday, supporting the dollar and putting pressure on currencies considered riskier.

Against the Japanese yen, the dollar fell 0.49% on Friday to 137.08. It fell 0.07 percent against the British pound, which was trading at $1.219.

The dollar index, which measures the performance of the US currency against six major currencies, remained roughly stable at 104.48, after rising by more than 0.9 percent on Thursday.

The index has risen about 9 percent this year as the Fed has raised interest rates sharply, drawing money back into dollar-denominated bonds.

However, it has fallen nearly 8% since hitting a 20-year high in September, as slowing US inflation revived hopes that interest rate hikes may soon be over, and better-than-expected economic data in Europe boosted the euro.

The risk-sensitive Australian dollar fell 0.07% to $0.67. It fell 2.38% in the previous session, its biggest decline since March 2020.

The New Zealand dollar rose 0.38% to $0.637.