The US dollar is on track to record notable weekly gains, benefiting from rising Treasury yields and growing expectations of further monetary tightening by the Federal Reserve, which has kept the greenback near its highest levels in several months.
Major Currencies Retreat Amid Dollar Strength The strength of the US currency cast a shadow over major global currencies, resulting in the following shifts:
Euro: Dropped to a two-month low at $1.1370, heading for its third consecutive weekly decline in its worst losing streak since late last year.
British Pound: Continued its decline near a three-month low, recording $1.3220, on track for its worst weekly performance in four months.
Japanese Yen: Continued trading near a three-week low at 158.8 against the dollar, as markets assessed the Bank of Japan's recent move to raise interest rates to a 31-year high as insufficient, while anticipating potential verbal warnings from Tokyo to intervene and support the currency.
Support Factors and the Dollar Index The Dollar Index, which measures the performance of the US currency against a basket of major peers, rose by more than 1% this week to reach a two-month high. This support was driven by the market's rapid adjustment of interest rate expectations following signals of monetary tightening, alongside a bond sell-off that pushed long-term Treasury yields to their highest levels in over 20 years, in addition to strong economic data and concerns regarding energy supplies.
Energy Markets and Other Currency Developments
Oil Prices: Oil prices jumped by more than 3% following a missile attack targeting Saudi Arabia, fueling concerns over supply disruptions and inflationary pressures.
Australian and New Zealand Dollars: The Australian dollar edged up slightly to $0.7015 amid expectations of a 25-basis-point interest rate hike to 4.60% (the highest in nearly 15 years), while its New Zealand counterpart stabilized at $0.5663.
Chinese Yuan: The offshore yuan exchange rate stabilized at 6.715 against the dollar, after the Washington summit between the US and Chinese presidents lacked substantial signs of progress on the issues of trade, artificial intelligence, Taiwan, and the repercussions of the Iran war.
