The euro and British pound plunged against the US dollar on Friday, with investors betting interest rates would stay low for longer in Europe and the UK, while waiting for next week’s US monetary policy meeting.
The US dollar index, posting its strongest weekly gain since the start of last month, rose 0.48% on the day to 90.51, up 0.45% for the week.
On Friday, the euro was down 0.63% to US $ 1.2099, posting its biggest weekly decline since the end of April.
On Friday in Taipei, the new Taiwan dollar appreciated against the greenback, gaining NT $ 0.073 to close at NT $ 27.631, up 0.3% for the week.
A day after the European Central Bank (ECB) stuck to its accommodative stance, ECB policymaker Klaas Knot said flexible fiscal rules would be needed for years as monetary policy remains constrained.
“ECB policymakers indicate that inflation rates are well below the levels needed to put upward pressure on rates,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
“This reduces the recent rally in the euro, putting downward pressure on the euro. The biggest contributor to the movement that we have seen overnight is the [euro] weakness as opposed to the dollar’s idiosyncratic positive forces. The dollar wins the reverse beauty pageant, ”Schamotta added.
The British pound fell 0.54% to $ 1.4098 as traders worried about slower-than-expected growth, with the rapid spread of the ‘Delta’ COVID-19 variant in the UK raising concerns that much of the country is unable to fully reopen after a pandemic. -confinement bound on June 21 as previously hoped.
Currency markets have been sluggish all week ahead of Thursday’s release of US consumer prices, which rose 5% year-on-year last month.
However, even with a number higher than expected, there was little market reaction. Investors appeared to support the US Federal Reserve’s claim that high inflation would be temporary.
Economists see the central bank announcing in August or September a strategy to scale back its massive bond buying program, but don’t expect it to start cutting back on monthly purchases until early next year , according to a Reuters poll.
Traders were still bracing for volatility around the Federal Open Market Committee (FOMC) meeting scheduled for the week ahead, said Greg Anderson, global head of currency strategy at BMO Capital Markets.
“If you start from a position where you are already short in dollars, since FOMC meetings often have a lot of volatility, you could reduce your short for risk management purposes,” Anderson said.
Meanwhile, investors left riskier currencies like the Australian dollar, which lost 0.72% to US $ 0.7697 after hitting its lowest level for the week, while the New Zealand dollar fell. lost 1.01% to US $ 0.7123 after hitting its lowest level since May 4. .
CNA Supplementary Reports, with Editor-in-Chief
Comments will be moderated. Keep comments relevant to the article. Comments containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. The final decision will be at the discretion of the Taipei Times.