The US dollar index, which measures the US dollar against six major currencies, has strengthened to 100 trading levels for the first time in nearly two years, boosted by the prospect of a more aggressive Federal Reserve rate tightening to curb soaring inflation.
The US dollar has gained against a basket of six major currencies over the past month, particularly against the Euro. This is because it is driven by investor concerns about the economic costs of the war in Ukraine and the presidential election that could potentially affect developments in France.
The dollar index rose as high as 100.19, the highest since May 2020, up 0.2% at 100.01 before slipping to a trading level of 99.850. According to Joe Manimbo, senior market analyst at Western Union, the strengthening of the US dollar was driven by a peak of bullish factors consisting of geopolitical risks, election uncertainty in France, and the Fed’s increasingly ‘hawkish’ interest rate outlook.
The US dollar index has risen 1.5% this week, its biggest weekly gain in a month, supported by ‘hawkish’ statements from some Fed policymakers.
The release of minutes of the Fed’s March meeting this week shows “many” policymakers are ready to raise rates in 50 basis points in the next few months.
On the other hand, the Euro continued to decline to a one -month low of $ 1.0837. Minutes of a meeting from the European Central Bank published on Thursday suggested policymakers were keen to act to fight inflation, but the eurozone has so far taken more cautious steps than other central banks, weakening the euro.
Not only that, intensifying electoral competition in France between President Emmanuel Macron and right -wing candidate Marine Le Pen has added pressure on the euro, raising investor concerns about the future direction of the European zone’s second -largest economy.
The market is now focusing on more indications from policymakers.
