Dollar strengthens against yen, weakens against euro

In the currency markets, the value of the dollar against a basket of currencies remained almost unchanged last week, with the dollar exchange rate against the euro weakening, while it reached a new highest level against the Japanese yen in 34 years.

The dollar index, which shows the value of the US dollar against six major world currencies, weakened by 0.03 percent last week, to 106.09 points. Meanwhile, the value of the dollar against the European currency slipped by 0.3 percent, raising the price of the euro to 1.0690 dollars. However, the dollar strengthened against the Japanese currency by 2.4 percent, reaching an exchange rate of 158.33 yen, a new highest level in 34 years.

The high dollar exchange rate is a result of estimates that the US central bank will not reduce interest rates as aggressively this year as was previously expected. During the week, it was reported that in the first quarter, the US gross domestic product (GDP) grew by 1.6 percent annually, significantly below analysts’ expectations and the slowest in nearly two years. On the other hand, inflation in that quarter reached 3.4 percent annually, while in the previous quarter it was 1.8 percent.

Not long ago, it was expected that the Fed would start lowering interest rates in June, but it is becoming increasingly clear that the central bank will not rush to cut rates due to elevated inflation. Currently, the prospects for the Fed to lower rates before summer have completely diminished, while the chances for a rate cut in September are estimated at 58 percent.

On the other hand, at last week’s meeting, the leaders of the Japanese central bank decided to keep the accommodative monetary policy unchanged.

As the yen exchange rate against the dollar has fallen to the lowest levels in 34 years, Japanese authorities have been warning for weeks that they might intervene to prevent further weakening of the yen. However, this has not yet stopped the yen’s decline.