NEW YORK — The euro hit a six-month
high reached on Thursday after European Central Bank President
Christine Lagarde said more rate hikes are needed to tame
inflation, before falling in choppy trading, a day after the
U.S. Federal Reserve signaled more increases to borrowing cost.
The ECB raised interest rates for the fourth time in a row,
although by less than at its last two meetings, pledged further
hikes and laid out plans to drain cash from the financial system
as part of its fight against runaway inflation.
Lagarde said that upside inflation risks remain, which
necessitates more tightening.
“The outlook for inflation is rather hawkish for the ECB
whereas here in the U.S. the rhetoric is that they are going to
keep raising until they win the fight against inflation, but I
think traders are becoming more convinced that the Fed is near
the end of tightening,” said Edward Moya, senior market analyst
at OANDA in New York.
The greenback weakened on Wednesday even after Fed Chair
Jerome Powell adopted a hawkish tone on the need for more
tightening even as the economy slips towards a possible
“Investors are going to be convinced for at least the next
month that inflation is going to continue to come down,” said
Moya. That said, “interest rate differentials will remain in the
dollar’s favor so I think that should give some underlying
The euro reached $1.0737, the highest since June
9, before falling back to $1.0642, down 0.38% on the day. The
dollar index against a basket of currencies was up 0.70%
on the day at 104.37.
The greenback briefly pared gains after data on Thursday
showed that U.S. retail sales fell more than expected in
November, likely payback after surging in the prior month, while
the labor market remains tight, with the number of Americans
filing for unemployment benefits declining last week.
A separate report showed that manufacturing activity in the
U.S. mid-Atlantic region contracted for a fourth straight month
in December, but factory operators reported a brighter outlook
and said inflation pressures were easing notably.
Sterling was lower on the day after the Bank of England
raised its key interest rate to 3.5% from 3% and indicated that
more hikes were likely.
It was last down 1.49% at $1.2243.
The Norwegian krone was lower on the day after Norway’s
central bank raised its benchmark interest rate by 25 basis
points to a 13-year high of 2.75% on Thursday, as expected by
economists, and said it will “most likely” hike again in the
first quarter of 2023 as inflation remains above its target.
The dollar gained 1.07% against the Norwegian currency
The Swiss franc was also lower on the day after
Swiss National Bank Chairman Thomas Jordan said it was too early
to “sound the all-clear” on high inflation after the central
bank hiked interest rates again on Thursday and hinted further
increases were still possible.
The SNB raised its policy interest rate by 50 basis points
to 1% – the central bank’s third hike this year as it stepped up
its campaign to dampen the rise in prices.
Currency bid prices at 10:25AM (1525 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Dollar index 104.3700 103.6600 +0.70% 9.102% +104.4100 +103.5300
Euro/Dollar $1.0642 $1.0683 -0.38% -6.39% +$1.0737 +$1.0605
Dollar/Yen 137.4750 135.4800 +1.44% +19.38% +137.4800 +135.2400
Euro/Yen 146.29 144.68 +1.11% +12.25% +146.6100 +144.3100
Dollar/Swiss 0.9284 0.9244 +0.46% +1.81% +0.9303 +0.9232
Sterling/Dollar $1.2243 $1.2428 -1.49% -9.47% +$1.2426 +$1.2240
Dollar/Canadian 1.3643 1.3543 +0.75% +7.91% +1.3644 +1.3541
Aussie/Dollar $0.6714 $0.6864 -2.19% -7.64% +$0.6870 +$0.6711
Euro/Swiss 0.9880 0.9874 +0.06% -4.72% +0.9916 +0.9840
Euro/Sterling 0.8691 0.8594 +1.13% +3.46% +0.8708 +0.8592
NZ $0.6358 $0.6460 -1.56% -7.09% +$0.6463 +$0.6357
Dollar/Norway 9.8570 9.7280 +1.07% +11.61% +9.8570 +9.7465
Euro/Norway 10.4882 10.3710 +1.13% +4.75% +10.5011 +10.3783
Dollar/Sweden 10.3214 10.1531 +1.18% +14.45% +10.3218 +10.1599
Euro/Sweden 10.9802 10.8520 +1.18% +7.34% +10.9859 +10.8532
(Editing by Nick Zieminski)