The dollar strengthened for the fifth week in a row

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ON THE FOREIGN EXCHANGE markets, the value of the dollar against a basket of currencies rose again last week, for the fifth time in a row, as it became increasingly clear that the interest rates of the American central bank will remain elevated longer than expected.

The dollar index, which shows the value of the US against the six most important world currencies, strengthened by 0.1 percent last week, to 106.12 points, and at one point reached the highest level in five months.

At the same time, the value of the dollar against the European currency slipped by 0.1 percent, so the price of the euro rose to $1.0655.

However, the dollar strengthened against the Japanese currency, by 0.9 percent, so its exchange rate reached 154.65 yen and hovers around the highest level in 34 years.

The strengthening of the dollar is due to estimates that the US central bank will not start cutting interest rates as soon as expected because the economy and labor market remain strong, while inflation is elevated.

Powell: No progress has been made in lowering inflation

Fed President Jerome Powell said last week that no progress has been made so far this year in lowering inflation and that monetary policy could remain restrictive for a longer period.

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Therefore, it is now estimated in the money market that there is only a 15 percent chance of a Fed interest rate cut in June, and about 42 percent in July.

The value of the dollar against a basket of currencies reached its highest level in five months in the middle of the week, also because the dollar is considered a safer haven for capital in uncertain times, and investors were worried about rising tensions in the Middle East, between Israel and Iran.

A big weakening of the yen

As a result, the dollar exchange rate against the Japanese currency reached a new 34-year high last week, although the Japanese authorities have been warning for weeks that they could intervene in the market to prevent further weakening of the yen.

On the other hand, the dollar weakened slightly against the euro. Thus, the European currency stabilized, after its exchange rate fell sharply a week ago because, by all accounts, the European Central Bank will start cutting interest rates before the Fed, given that inflation in the eurozone is moving at lower levels, while some economies of that bloc in recession.

The market estimates that the process of loosening the ECB’s monetary policy could begin in June.

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