The euro held steady on Friday; however, it was still on track for weekly gains after the European Central Bank said its stimulus program would be phased off. However, the euro remained under pressure as stagflation fears arose due to the Ukraine conflict. After robust U.S. inflation data, the dollar rose to a five-year high against the yen. When four weeks of falls, the euro soared this week after the European Central Bank said that its stimulus program would be phased out in the third quarter, paving the way for an interest rate hike before the end of 2022 to battle rising inflation.
The ECB, on the other hand, gave little long-term support to the euro, which fell 0.1 percent to $1.0975 as of 0930 GMT, after soaring as high as $1.11215 on a tumultuous day on Thursday. “On another day – say, pre-war – EUR/USD would have benefited from ECB hawkishness for a long time,” said Chris Turner, ING’s Global Head of Markets. On Thursday, talks between Ukraine and Russia made little headway in ending the war, which is now in its third week. As markets waited for Fed tightening, the dollar soared to a five-year high against the yen, recently up 0.7 percent to 116.97 yen after reaching its highest level since January 2017.
Fed Reacts to Recent Chaos
The Federal Reserve and the Bank of Japan also have policy meetings next week. However, the Fed should raise rates from current historic lows while the BOJ will stay an outlier. The dollar increased 0.37 percent versus a basket of currencies to 98.730. Commodity-linked currencies paused for a moment. After a stormy surge fueled by increased commodity prices, the Norwegian crown and Canadian dollar remained stable. At the same time, the Australian and New Zealand currencies lost value.
The Ukraine conflict has also dragged on sterling, which has lost 2.7 percent against the dollar this month and touched a 16-month low of $1.3056 on Friday.
Bitcoin is now worth $39,152, down 0.5 percent. It had risen earlier this week after U.S. President Joe Biden issued an executive order demanding the government to study the risks and advantages of developing a central bank digital currency on Wednesday.