Dollar Reached its Highest Point in Several Weeks

The U.S. dollar reached its highest level in five weeks on Wednesday. The U.S. currency rose after the Federal Reserve said it is likely to raise U.S. interest rates in March as anticipated and later launch a noticeable reduction in its asset holdings. 

The Fed’s Chairman Jerome Powell said the central bank will be open-minded as it adjusts monetary policy to keep persistently high inflation from becoming entrenched. 

The Federal Open Market Committee’s statement came in response to inflation running at its highest level in nearly 40 years. 

On Wednesday, stocks on Wall Street mostly sold off as the comments raised uncertainty. The central bank’s statement at the end of its meeting left questions. Investors and analysts want to learn more about its plans regarding its almost $9 trillion balance sheet.

Dollar and important details

The dollar index which tracks the greenback against a basket of currencies rose to its highest point in more than two months.

It was not an easy week for equity markets. They had been on a rollercoaster ride this week due to a combination of factors. Equity markets abandoned high-flying technology shares and focused on safe-haven assets such as the U.S. dollar.

The euro dropped 0.51% against the U.S. dollar to $1.1241.

The Japanese yen fell 0.64% against the greenback to 114.58 per dollar.

The Bank of Canada made an important announcement. The central bank earlier said it will soon start hiking rates to combat inflation as the local economy no longer needed to help mitigate the impact of the pandemic. The Bank of Canada surprised some analysts by leaving its key interest rate unchanged at 0.25%. 

The Canadian dollar dropped 0.35% against the U.S. currency to 1.27 per dollar.