Dollar is on Course for its Best Week Since June

The U.S. currency rose on Friday morning in Europe, on track for its best week in several months, as traders position for a tighter U.S. monetary policy in the near future. The Dollar Index, which tracks the U.S. currency against a basket of six other currencies, traded 0.1% at 94.315. At 2:55 AM ET, the index was close to its highest level since September 2020 having gained over 1% so far this week, the largest weekly rise since late June. 

The USD/JPY dropped 0.1% to 111.16. Japan’s business mood for a fifth straight quarter in September. The country’s business mood helped to boost the yen. 

The EUR/USD fell to 1.1579, near its lowest levels since July 2020. The GBP/USD dropped 0.2% to 1.3449, just above a 9-month low. The risk-sensitive AUD/USD declined 0.4% to 0.7198, just above one-month lows.

Traders started positioning for the country’s central bank to begin tapering its asset purchases before the end of 2021, and for the interest rate hikes starting in the second half of 2022.

Federal Reserve’s Chair Jerome Powell made an interesting statement on Wednesday. He stated that resolving “tension” between high inflation and unemployment is the most urgent issue facing the Fed right now. As a reminder, inflation is running at its hottest pace in about 30 years. 

He still expects inflation to ease eventually, nonetheless said that he sees the current pressures running into 2022. ECB’s President Christine Lagarde, and Bank of England’s Governor Andrew Bailey also think that inflation is temporary. Another major central bank’s boss, Bank of Japan’s Governor Haruhiko Kuroda, also believes that inflation is temporary. 

Dollar and Czech koruna

U.S. second-quarter growth was revised slightly higher this week. The focus will be on the release of the core personal consumption expenditures price index on Friday. The Federal Reserve is using the core personal consumption expenditures price index to set policy.

The index stated above is expected to rise 0.2% in August and 3.6% year over year, unchanged on an annual basis from July. 

The USD/CZK traded flat at 21.8660 on Friday. One Day earlier, the Czech koruna posted sharp gains thanks to the Czech National Bank’s decision. The country’s central bank decided to increase interest rates by 75 basis points, its biggest interest rate hike since 1997. Its decision surpassed expectations and also lifted the bank’s two-week repo rate to 1.50%.

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