The dollar is flying to its highest level in 20 years

The US dollar rose to its highest level in 20 years against other major currencies on Monday after Federal Reserve Chairman Jerome Powell indicated that interest rates will remain high for a longer period in order to rein in spiraling inflation.

The dollar index, which measures the value of the US currency against a basket of other currencies, rose to a new high it had not reached in two decades at 109.48.

This left European currencies in the doldrums even though the European Central Bank’s hawkish comments boosted expectations of a rate hike in September.

The euro fell 0.25 percent in early European trade to $0.99415, close to its lowest level in 20 years, while the pound fell to its lowest level in two and a half years.

London markets were closed for a public holiday.

Speaking at a central bank symposium in Jackson Hole, Wyoming, on Friday, Powell said that the Federal Reserve will raise interest rates to the highest level necessary to restrain growth and will keep them at that level “for some time” to reduce inflation, which has reached more than three times the Fed’s target rate of two percent.

And US Treasury yields rose, as the two-year bond yields reached their highest level in 15 years at about 3.49 percent, contributing to strengthening the dollar index.

The dollar rose 0.8 percent to 138.81 yen, after hitting its highest level since July 21, while the yuan fell to a two-year low of 6.9321 per dollar.

The British pound fell to its lowest level in two and a half years at $1.1649, before finally falling 0.5% to $1.1676.

With risk aversion dominating global markets, the Australian and New Zealand dollars were negatively affected by selling pressure.

The Australian dollar fell to $0.6838, its lowest since July 19, while the New Zealand dollar fell to its lowest level since mid-July at $0.61.

As for cryptocurrencies, Bitcoin has regained some of its value but remains below the $20,000 level.