The Dollar is Heading For The Largest Weekly Gain in 7 Months

The dollar consolidated its gains on Friday and is heading for the largest weekly increase in seven months, as the greenback’s gains against other major currencies are supported by expectations of an interest rate hike.

With financial markets factoring in an expected 30 basis point interest rate hike in March and combined increases of more than 120 basis points before the end of the year, the dollar is in focus even as the broader currency markets have calmed somewhat after an eventful week in global markets marked by a tightening tendency. At a Federal Reserve meeting.

On Friday, the euro trimmed its previous losses, after rising slightly to $1.1152 from a 20-month low reached on Thursday at $1.1131.

Major currencies moved in a narrow range up and down in Asian trading ahead of the Chinese New Year holidays next week, even as US bond yields registered a slight increase.

The US currency also received support from economic data, as the US economy recorded its best annual growth in nearly four decades. The Fed’s hawkish stance is likely to be confirmed after other data released on Friday including the US Employment Cost Index and the University of Michigan Sentiment Survey.

The Japanese yen hovered around 115.43 against the dollar, while the Australian and New Zealand dollar declined, as the latter fell slightly to 0.6570 US dollars, the lowest level in 15 months.

Since the beginning of the week, the dollar has increased about 1.7 percent against the euro and about two percent against the Australian and New Zealand dollars, and the dollar index has jumped above the 97 levels for the first time since July 2020.

The British pound fell on Thursday to a one-month low of $1.3360, but rebounded to $1.3409 as traders await the Bank of England’s meeting next week.