London, Sept. 9 (BUS): The dollar was on track to post its first weekly drop in four Fridays, as an interest rate hike from the European Central Bank lifted the euro and investors looked ahead to US inflation data early next week.
The dollar lost ground across the board, with the dollar index – which measures the greenback against six major peers – down 1.1% on the day. Reuters reported that it was last down 0.7% to 108.770 and heading for a weekly decline of 0.8%.
The euro was among the big gainers, as it jumped as much as 1.2% to a three-week high of $1.01140, a day after the European Central Bank raised its key interest rate by an unprecedented 75 basis points.
It last rose 0.7% to $1.00645.
“This is clearly a differential story in interest rates,” said Sami Char, chief economist at Lombard Odier.
“We have yields in Europe that are still well supported after the ECB, and that was – as expected – bullish across all policy instruments. On the other hand, US yields are falling a bit.
“Combining the two, this is probably the reason for the decline of the dollar.”
Europe continues to face a tense economic outlook, as ultra-high energy prices put pressure on consumers and businesses. European Union energy ministers split on Friday over setting a cap on Russian gas prices, as they met to devise steps to protect citizens.
Markets are setting an 86% chance that the US Federal Reserve will follow the European Central Bank’s lead by raising 75 basis points this month, and new US consumer price data next week is likely to be watched closely.
Currencies seen as riskier bets also benefited from a rebound in market sentiment towards the end of the week, which was reflected in gains across European stock markets.
Sterling rose 0.8% to $1.15925, after a modest decline the day before after the death of Queen Elizabeth. Britain’s King Charles is due to address the nation later on Friday.
The Bank of England said on Friday that it will postpone its next monetary policy meeting by a week due to the royal mourning period.
The Japanese yen was headed for its best daily jump in a month, up 1.5% to 141.985 yen per dollar, moving away from its lowest in 24 years.
Bank of Japan Governor Haruhiko Kuroda said on Friday that rapid moves in the yen are not desirable after a meeting with Prime Minister Fumio Kishida.
The Australian dollar was also on track for its best daily gain in a month, rising 1.4% against the dollar to $0.68480, also rebounding from deep lows.
Even the trounced cryptocurrency has outpaced the dollar, with bitcoin back above $20,000 and up 9%.
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