NEW YORK - The hit a 20 year high against a basket of currencies on Thursday as a sharp stocks selloff boosted demand for the safe-haven currency and as the Federal ReserveFederal Reserve was seen as tightening monetary policy more than peers.
On Thursday, the stock price fell as investors fretted that the Fed might need to take more drastic action to bring under control.
The dollar dropped on Wednesday and stocks gained after Fed Chair Jerome Powell told reporters that policymakers were not actively considering 75 basis-point moves in the future. It came after the U.S. central bank hiked rates by 50 basis points, as was widely expected.
Joe Manimbo, senior market analyst at Western Union Business Solutions said in a report that the Fed's decision helped to quell concerns about aggressive rate hikes pushing the economy into recession because of the fact that it came at the dollar's expense.
The bounce bounced back, as rates still appeared on a path to more than double 1.9% by July and possibly triple 2.7% by year-end, a solidly hawkish outlook that sets the Fed apart from its major rivals, he said.
The index was at 103.94, the highest since December 2002, before falling back to 103.73, up 1.16% on the day.
After raising interest rates to their highest since 2009, the economy was at risk of a recession, it fell to its lowest level since June 2020.
Erik Nelson, a macro strategist at Wells Fargo in New York, said the was extremely dovish. They are telling the bankers that they are completely overpricing where the path of the bank rate is. The British currency was down 2.25% at $1.2351.
German data showed that industrial orders in March suffered their biggest monthly drop since October, which has resulted in a decrease in the euro's value.
The single currency has fallen as the region struggles with weaker growth and energy disruptions due to sanctions imposed on Russia after its invasion of Ukraine.
It fell to $1.0518, a 0.98% drop, and is just above a five-year low of $1.0470 reached last Thursday.
Investors will be focused on the US data to find out how aggressive the Fed will be in tightening policy, according to the U.S. data.
Consumer price data is due on Wednesday and the government's jobs report for April will be released on Friday.
The new claims for U.S. unemployment benefits increased to a more than two-month high last week, but remained at a level that was consistent with tighter labor market conditions and further wage gains that could keep hot for a while, according to data on Thursday.