Dollar rallies as pressure placed on euro

Published: 18 Dec at 5 AM Tags: Euro, Dollar,

The dollar has hit an eight-day high against the euro as it rallies against a basket of currencies. The greenback was given a boost on Wednesday as the Federal Reserve indicated it intends to increase interest rates at some point next year. Previously the central bank had pledged to keep rates as close to zero as possible for the foreseeable future.

An impending rate hike is a sign of confidence in the US economy and is likely to make the dollar stronger as investment flows into the US increase. Janet Yellen, Chair of the Federal Reserve , said normalisation was unlikely to start for at least the next two meeting of the bank’s policy makers.

The comments caused the euro to drop to $1.2320, the lowest the single currency has been since 9 December. The dollar is also up against the Swiss franc at 0.9745 francs. Following a peak of 118.89 yen the dollar has settled at 118.60 yen.

The euro suffered after a policy maker at the European Central Bank admitted it was likely that a programme of bond buying will be introduced.

The dollar index, which measures the greenback against the world’s major currencies, is up 0.99 per cent to 88.995.