Dollar Strengthens, Yuan Breaks Through Key Threshold on Recession Fears By


© Reuters.

By Peter Nurse – The U.S. dollar strengthened in early European trade on Friday, while the Chinese yuan crossed a crucial threshold as worries about rising interest rates and a potential recession dampened risk appetite.

At 03:10 ET (07:10 GMT), the , which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 109.545, not far from its two-year peak of 110.79.

Both the World Bank and the International Monetary Fund warned late Thursday of an imminent global economic slowdown, with Indermit Gill, the World Bank’s chief economist, saying he was concerned about “generalized stagflation,” a period of low growth and high inflation.

Fears of a global recession are growing with many central banks aggressively tightening monetary policy to fight inflation at historic levels.

It is widely expected to increase by 75 basis points next week, and the Bank of England is likely to increase its for the seventh meeting in a row.

This unfavorable economic assessment has weighed on the currencies that are perceived as riskier, with the dollar the main beneficiary.

The Chinese yuan traded above the critical 7 per dollar threshold for the first time in more than two years, up more than 0.3% to 7.0121 despite data showing surprising resilience in the Chinese economy as it grew faster than expected and grew fastest in six. months

fell 0.1% to 0.9990, trading below parity ahead of the release of the data for August. This is expected to show that inflation remained resilient in the bloc, up 0.5% on the month and up 9.1% on the year, as the region struggles to cope with rising energy prices.

fell 0.3% to 1.1424 after the UK posted its sharpest fall for the year so far in August, falling 1.6% on the month and 5.4% on the year, as the cost of living crisis more than offset some modest relief from fuel prices in the month

rose 0.1% to 143.59, with the yen struggling as the yield hit a fresh peak of 3.901% on Friday, the highest since 2007.

The will also meet this week, but it is extremely unlikely to authorize a tax, which means that the Japanese currency will suffer more from the growing interest rate differences.

rose 0.1% to 0.6706, rebounding after hitting a two-month low of 0.6685 earlier in the session.

Additionally, it rose 0.4% to 60.0288 ahead of the latest Russian central bank policy meeting. Most economists polled by Bloomberg predict a drop of half a percentage point to 7.5%, which would be the smallest interest rate since the central bank began easing monetary policy after the invasion of Ukraine.



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