The dollar hit a two-decade high on Thursday after US inflation fell less than markets expected. This means that the Federal Reserve is on its way to tighten monetary policy aggressively.
The consumer price index reached 8.3 percent on an annual basis in April, noting that it declined from 8.5 percent in March. But it exceeded economists’ expectations, which estimated it at 8.1 percent.
The data suggests that inflation may have peaked, but is unlikely to decline quickly and derail the Fed’s monetary policy plans, according to “Reuters”.
New York Federal Reserve President and Federal Reserve Board member Bill Dudley called for an acceleration of the key interest rate increase to 5 percent to curb inflation in the United States.
The dollar, which is considered a safe haven, got support from the decline in global stocks amid investors’ fears that central banks are behind this trend in an attempt to curb consumer prices. Growth is already facing risks as a result of the closures that China has implemented for some time to contain the Coronavirus.
The dollar index, which measures the performance of the US currency against six major currencies, rose by about one percent to 104.22, its highest level since December 2002.
The euro settled at 1.05095 dollars after receiving a boost. ECB President Christine Lagarde’s comments reinforced expectations that the bank will raise interest rates in July for the first time in more than a decade. Lagarde said yesterday, Wednesday, that the European Central Bank will “first” end its net asset purchases “at the beginning of the third quarter”, that is, in July, and then raise the interest rate for the first time “at a later time”, noting that “this could mean only a few weeks.”
The single European currency fell to its lowest level in more than five years at 1.04695 dollars at the end of last month.
The yen rose 0.2 percent to 129.67 against the dollar, moving further away from its lowest level in more than two decades at 131.35, which it reached on Monday, with 10-year Treasury yields falling to
the lowest level in nearly two weeks at 2.862 percent in trading in Tokyo today, Thursday.
The British pound, which also tends to move with risky assets, fell to $1.2211 today, Thursday, for the first time since about two years.
The Australian dollar fell 0.76 percent to $0.6885
It earlier reached $0.68795 for the first time in two years. The New Zealand dollar also fell 0.79 percent to 0.6240 dollars, which is also the lowest level in almost two years.
