The U.S. Dollar Index hit a one-year high today as traders bet that the U.S. Federal Reserve (Fed) would raise interest rates this year. As reported by Reuters, this pushed the Japanese yen to its lowest level in two years. On Wednesday, the Fed left its benchmark interest rate unchanged in the range of 3.50 to 3.75 percent.
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US Dollar Surges to Yearly High as Strong Economic Data Fuels Rate Hike Expectations
The dollar index, which tracks the dollar’s performance against a basket of six major world currencies, rose 0.24 percent to 100.59 points, reaching as high as 100.8 points, its highest level of the year. The euro was down 0.28 percent against the dollar around 7:00 p.m. CEST today, trading slightly below $1.15.
A stronger outlook for U.S. economic growth is fueling expectations of rate hikes. The last three jobs reports have shown a more significant monthly increase in jobs than economists had anticipated. “We’re seeing very impressive data in the U.S.,” said Sarah Ying, an analyst at CIBC Capital Markets. Experts see further room for the U.S. currency to strengthen.
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ECB and Bank of Japan Push Rates Higher, While Bank of England Holds Steady
As expected, the European Central Bank (ECB) raised interest rates by a quarter of a percentage point last week, bringing the key deposit rate to 2.25 percent. The Bank of Japan also raised rates by a quarter of a percentage point this week. Japan’s base interest rate thus rose to one percent, its highest level in 31 years.
Today, the Bank of England decided on its interest rates, leaving them at 3.75 percent. According to Reuters, the bank concluded that it would be premature to raise rates in the current situation, given the uncertainty surrounding the strength of inflationary pressures.
