New York – The euro reached a record high against the yen and its highest level against the dollar in five weeks on Thursday following the European Central Bank’s decision to raise interest rates for the eighth consecutive time. The ECB’s move is aimed at achieving its medium-term target of 2 percent inflation in the eurozone. The central bank raised rates by 25 basis points to 3.5 percent, the highest level in 22 years. Inflation forecasts excluding energy and food have also been revised upward for this year and next. The projected inflation rate for this year was increased to 5.1 percent from 4.6 percent. Deutsche Bank predicts a final rate hike of 25 basis points in July to reach a terminal rate of 3.75 percent, with risks leaning towards further increases.
The euro’s exchange rate saw a significant increase following the ECB’s announcement. In late afternoon trading, the euro was up 1.1 percent against the dollar, reaching a five-week high of $1.0952, and rose 1.2 percent against the yen, hitting its highest level since September 2008. The Federal Reserve’s decision to leave interest rates unchanged while signaling future rate hikes also played a role in the movement of the euro. The Bank of Japan is expected to maintain its dovish stance and yield-curve control settings.
The dollar index, which measures the currency against a basket of other major currencies, dropped to a five-week low of 102.08. Analysts suggest that the dollar may face further losses in the near future due to the end of the global monetary policy cycle. The recent U.S. retail sales data showing unexpected growth and unchanged state unemployment claims did briefly trim the dollar’s losses.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.