USD gains highest since April 2020

The US dollar gained 0.73% to 136.87 against the Japanese yen, the strongest since July 27. Sterling tumbled 1.03% to $1.1813 and had its biggest weekly drop against the dollar since September 2020.

The US central bank needs to keep raising borrowing costs in order to tame high inflation, as clearly expressed by Fed speaks on Thursday. The US dollar index hit a five-week high and posted its biggest weekly gain since April 2020 on Friday as investors adjusted monitor Fed’s rate hiking expectations.

Yet, US central bank officials have sufficient time before they need to decide how large an interest rate increase to approve at their September 20-21 meeting, Richmond Fed President Thomas Barkin said on Friday.

Fed’s policymakers look determined to have one obvious mission, namely getting inflation back to target. The dollar index rose 0.61% to 108.13, its highest since July 15, while the euro dropped 0.54% to $1.0033, its lowest since the same date. The Fed is seen as having more room to hike rates than central banks of other large economies which are more fragile.