The majority of global transactions are processed in these two currencies.
(Photo: AFP)
Frankfurt The euro fell further on Friday and hit a low for over a year. In the morning, the common currency cost 1.1436 US dollars at times and thus as little as last time in July 2020. At the end of October, it was still quoted at just under 1.17 dollars. The European Central Bank (ECB) set the reference rate on Thursday at $ 1.1460.
The euro is currently suffering from the divergence in monetary policy in the US and the euro zone. While the US Federal Reserve is scaling back its immense securities purchases and the high inflation is fueling expectations of interest rate hikes, the ECB has remained true to its loose course so far. The Fed’s less generous monetary policy strengthens the dollar and puts pressure on the euro.
On Friday, the dollar index climbed to its highest level since July last year, rising 0.1 percent to 95.2650 points. “The unexpectedly high US inflation rate has further fueled interest rate expectations,” said Thomas Altmann from asset manager QC Partners on the development.
Because investors expect interest rates to rise faster in the US than in the euro zone, capital is flowing into the US. The result is an appreciation of the dollar. “The export-oriented German economy can look forward to this development. This will make German products cheaper and more attractive in the USA. “
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At the end of the week, only a few economic data of particularly high importance are on the program. In the euro zone, industrial production figures are expected, in the USA the University of Michigan publishes the results of its regular consumer sentiment survey.
More: OECD chief economist Laurence Boone warns: “Inflation is in a highly uncertain phase”