By Peter Nurse
Investing.com – The US dollar declined in early European trading on Friday, but remained close to a 20-year high with Federal Reserve Chairman Jerome Powell largely cementing the likelihood of further strong interest rate hikes to fight stubbornly high US inflation.
At 3:15 AM ET (0715 GMT), which tracks the greenback against a basket of six other currencies, fell 0.2% to 104.645, just from its overnight two-decade high of 104.92.
The dollar has been in demand for much of the year, with the Federal Reserve seen as one of the most aggressive central banks in the world in fighting rising inflation.
Last week it raised its benchmark interest rate by 50 basis points, the biggest increase in 22 years, and expects to continue to tighten monetary policy aggressively in the coming months.
“If the economy is performing roughly as expected … it would be appropriate for there to be an additional 50 basis points increases at the next two meetings,” Powell said in an interview with the public radio program Marketplace on Thursday.
However, he added that the Fed did not “actively consider” a larger increase of 75 basis points, comments that prompted some traders to redo their long dollar positions.
rose 0.2% to 128.58, climbing again after falling to a two-week low of 127.50 overnight as the yen received some support as the benchmark continued to decline from Monday’s high of 3.203%.
rose 0.2% to 1.0398, still not far from its 2017 low of 1.0340, a break from which would place the pair at the lowest in nearly 20 years.
This weakness comes despite an ECB president on Thursday joining the chorus of policymakers calling for the central bank to start raising interest rates amid expectations that it will act in July.
“The EUR has obviously struggled to extract any tangible gains from the increasingly bleak tone among ECB politicians,” said analysts at ING, in a note, “which in our view boils down to the already rather aggressive tight expectations (80-85 bp fully). “price by the end of the year) and continuing uncertainty over whether the ECB will be able to deliver many further increases later due to the deteriorating economic outlook in the euro area.”
Additionally, it rose 0.1% to 1.2209, rebounding slightly after falling to a near 2-year low during the previous session after data showed the British economy grew less than expected in the first quarter.
rose 0.2% to 6.7989, with the yuan under pressure after Beijing filed a number of additional COVID-19 cases, prompting officials to deny speculation that the capital will be locked.