The dollar index held near 16-month highs on Tuesday after Federal Reserve Chair Jerome Powell was picked for a second term, reinforcing market expectations that U.S. interest rates will rise in 2022
The euro bounced off of 16-month lows, meanwhile, helped by better-than-expected business growth in the region
Currency markets have been mostly driven in recent months by market perceptions of the different paces at which global central banks reduce pandemic-era stimulus and raise rates
Powell’s renomination supports the view that the Fed is likely to begin raising rates in mid-2022, after ends its bond purchase program
“Markets perceived the outcome as marginally hawkish, and futures now firmed up expectations for a hike in June from having been skewed towards July,” currency analysts at Brown Brothers Harriman said in a note on Tuesday
The dollar index was last up 0.06% on the day at 96.514, slightly below the 16-month high of 96.61 it reached during Asian trading hours
The euro gained 0.10% against the dollar at $1.1245, recovering after earlier hitting a 16-month low of $1.1226
The euro had tumbled on Monday as concerns grew over new COVID-19 restrictions in Europe, with Austria entering another full lockdown and Germany considering following suit.
Germany’s health minister has called for further restrictions on public spaces
The euro has some short-term technical support in the $1.1240 – $1.1180 area, which were the highs reached in October and December 2019, Commerzbank technical analysts Karen Jones and Axel Rudolph said in a report on Tuesday. If it breaks below this area, however, it would likely fall to $1.1000, which is the 78.6% retracement of 2020′s move, they said
The dollar hit a four-and-a-half year high against the Japanese yen of 115.08 yen
The greenback hit a fresh seven-week high of C$1.2744 against the Canadian dollar , which was hurt by a slide in oil prices, before falling back to C$1.2710
Turkey’s lira dropped to a new record low of 12 versus the dollar . This was its eleventh record low in as many days, after President Tayyip Erdogan defended recent rate cuts and vowed to win an “economic war of independence”