The dollar maintains its gains as Fed continues its battle with inflation

The dollar touched its highest level in three weeks on Thursday after the release of the minutes of the Federal Reserve’s meeting for the month of July, which indicated the continuation of raising US interest rates for a longer period to reduce inflation.

The dollar’s rally caused sterling to briefly drop below $1.2 in early European trade, its lowest level in three weeks. The Euro fell to $1.0146 and the Japanese Yen fell to 135.45 per dollar.

This pushed the dollar index to reach the level of 106.96, the highest since late July.

However, the Euro, the British Pound and the Yen pared their losses during the morning trading, and the three currencies compensated for their losses, to be trading unchanged during the day, leaving the dollar index at 106.65.

Federal Reserve board meeting minutes showed that its officials saw “negligible evidence” late last month that inflation pressures in the United States were easing.

The minutes revealed that officials had hinted that the pace of increases would eventually slow, but without a switch to lower interest rates in 2023.

In Asian trading, the US dollar made the biggest gains against the Australian dollar, which was lowered by the impact of weaker-than-expected wage growth on the interest rate outlook in Australia.

The Australian dollar fell to a one-week low of $0.6899 after the release of employment data which showed a decline in both employment and the unemployment rate, before rebounding slightly to $0.6951.

Meanwhile, the Chinese yuan continued to struggle as weak consumption, low sentiment, a real estate crisis and COVID-19-related restrictions cast heavy shadows on the outlook for the world’s second-largest economy.

The yuan fell nearly 0.2 percent to 6.788 against the dollar, and also fell below the 200-day moving average against the euro.