The dollar fell in early European trade Friday, continuing to fall the day after the Bank of England raised its key interest rate.
The Dollar Index measures the value of the US dollar against a basket of six other currencies. It fell 0.1 percent to 95.950 after falling to its lowest level in more than a week on Thursday. Most economists expect a 100 basis-point increase, the second such increase this year.
The central bank has raised its key interest rate by 325 basis points. Eurozone inflation reached its highest level on record in November, with energy prices accounting for more than half of the increase.
Eurostat reported that inflation in the eurozone’s 19 member countries rose to 4.9 percent, a year-on-year increase consistent with an earlier Eurostat estimate. The month-on-month growth was revised down to 0.4 percent from 0.5 percent previously reported.
GBP/USD traded flat at 1.3319 after climbing as high as 1.3375 in the previous session. This was its highest in nearly a month, when the BoE raised interest rates for the first time since the pandemic began, becoming the first G7 central bank to do so.
EUR/USD was also unchanged at 1.1328. The pair reached its highest level this month on Thursday after the European Central Bank’s latest policy meeting. It announced asset tapering plans for the coming quarters.
These actions come after the Federal Reserve announced on Wednesday that it was accelerating the tapering of its asset-purchase program, paving the way for three quarter-point interest rate hikes by the end of 2022.
The United Kingdom set a new record for daily coronavirus cases for the second day in a row, with nearly 90,000 infections confirmed. At the same time, France and Italy tightened their entry restrictions. The USD/TRY exchange rate rose 2.7 percent to 16.0903. The lira fell to a new low. This resulted from Turkey’s central bank cutting its policy rate by 100 basis points to 14%, despite inflation exceeding 21%.
The USD/RUB fell 0.1 percent to 73.7234. Expect another hike in the key interest rate as inflation remains above the central bank’s 4 percent target.
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