The dollar held firm against the euro, with traders saying the U.S. Federal Reserve will likely raise its benchmark rate to 5.3% and keep it on hold to curb inflation after data showed the labor market remained strong.
An earthquake in central Turkey and Syria and a strong U.S. dollar pressured emerging currencies, sending the Turkish lira to a record low of 18.84 against the dollar.
The Fed increased rates by 25 basis points on Wednesday, saying it had moved to fight inflation.
But an eye-popping U.S. non-farm payrolls number on Friday, along with a significant increase in the services industry in January, lifted the dollar to mid-January. Hence, investors priced the Fed’s policy rate at its peak of 5.06% in June.
The dollar index hit a three-week high of 103.24. On Friday, the index increased by 1.13%.
However, the much better-than-expected data is bad news if the Fed believes it will raise rates longer.
Also, the safe-haven dollar’s strength has fueled tensions between the US and China after a U.S. warplane shot down a suspected Chinese spy balloon off the coast of South Carolina.
The euro fell 0.23% to hit a nearly three-week low of $1.0768. The single currency hit a 10-month high on Thursday after the European Bank raised its deposit rate to 2.53% and announced a 50 basis point rate hike in March.
Japans currency fluctuates
The yen decreased after the Nikkei newspaper citing anonymous government and ruling party sources, reported that the Bank of Japan’s deputy governor was being tipped to be the next governor.
Deputy Chief Cabinet Secretary Yoshihiko Isozaki said the Nikkei report was wrong. The yen was 0.53% weaker at $131.91. It hit a three-week low of $132.61 earlier in the session.
The BOJ’s loose policy settings have drawn criticism from many quarters, including opposition politicians, for distorting market function.
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