Fed rate decision: Dollar continues to soar

Die repeated The Federal Reserve raises key interest rates by 0.75 percentage points has given further impetus to the dollar's buoyancy. The dollar index, which tracks rates against major currencies, rose to 111.79 points on Thursday, a 20-year high. At the beginning of 2002, the index was at more than 120 points. This had been the most recent surge in the world's most important currency, which began in 1995 and ended in 2002. The dollar's highest level since the collapse of the Bretton Woods system of fixed exchange rates in the 1970s was more than 165 points in the mid-1980s.

In return, the euro appreciated to 0.981 dollar its lowest level since October 2002. The British pound fell as low as $1.1221, a 37-year low against the dollar.

"What else can you buy right now but the dollar," rhetorically asked Sally Auld, chief investor at wealth manager JB Were. "The Fed will not stop raising interest rates in the foreseeable future." The central bank had made this clear the previous evening. Other stockbrokers also point to the attractiveness of the dollar as a "safe haven" against the background of the looming recession in Europe, the weakening Chinese economy and the ongoing war in Ukraine. The dollar is the only game in town, according to TD Securities.

Nevertheless, some market participants see a tense situation with regard to several technical indicators. The aggressive streamlining by the fed Gary Dugan, head of the Global CIO Office, has warned that the dollar has entered the final stages of a rapid rally that could have a dramatic and volatile end. The accelerated tightening means the dollar's rally has entered its final phase, he told Bloomberg. However, this does not rule out the risk that this phase could be volatile and dramatic. The path to a weaker dollar remains "difficult".

In addition, the European Central Bank (ECB) has gradually tightened its stance. ECB Director Isabel Schnabel said now in an interview with "t-online" published on Thursday, notwithstanding the interest rate increases, she does not expect the high inflation in the euro area to fall quickly. Even in the event that a downturn dampens inflation, the ECB would have to raise interest rates further given the very low starting level - even if there is currently no evidence of a wage-price spiral.

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