The dollar is lower, but remains close to a 20-year high from

© Reuters.

By Peter the Nurse – The US dollar fell at the start of European trade on Friday, but remained close to a 20-year high, with Federal Reserve Chairman Jerome Powell largely cementing the likelihood of a further sharp rise in interest rates to fight persistently high inflation in the United States.

At 3:15 a.m. ET (07:15 GMT), which tracks greenbacks against a basket of six other currencies, fell 0.2 percent to 104,645, just after a peak of 104.92 overnight for two decades.

The dollar has been in demand for most of the year, with the Federal Reserve seen as one of the world’s most aggressive central banks in the fight against rising inflation.

It raised its key overnight interest rate by 50 basis points last week, the biggest increase in 22 years, and is expected to continue tightening monetary policy aggressively in the coming months.

“If the economy performs roughly as expected… it would be appropriate to have additional increases of 50 basis points in the next two meetings,” Powell said in an interview with the public radio program Marketplace on Thursday.

However, he added that the Fed was not “actively considering” a larger increase of 75 basis points, comments that led some traders to withdraw their long positions in dollars.

rose 0.2% to 128.58, rising again after falling to a two-week low of 127.50 overnight as the yen gained some support as the benchmark continued to fall from its highest level on Monday. 3.203%.

rose 0.2% to 1.0398, still close to the bottom of 2017 of 1.0340, a break that would put the pair at its lowest level in nearly 20 years.

This weakness comes as the ECB’s president on Thursday joined a line of politicians calling on the central bank to start raising interest rates amid expectations that it will take action in July.

“The euro is clearly struggling to reap any tangible benefits from the growing hawkish tone among ECB politicians,” ING analysts said in a note, which we believe boils down to already quite aggressive expectations of tightening (80-85 bp at full price). by the end of the year) and the continuing uncertainty as to whether the ECB will be able to deliver much more afterwards given the deteriorating economic outlook in the euro area.

It also rose 0.1% to 1.2209, recovering slightly from a near 2-year low during the previous session, after data showed that the British economy grew less than expected in the first quarter .

rose 0.2% to 6.7989, with the yuan under pressure after Beijing registered several more COVID-19 cases, prompting officials to deny speculation that the capital would be locked.

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