After a period of decline that lasted for two weeks, the dollar showed signs of recovery last week. On world currency markets, the US currency strengthened against a basket of major currencies. This is partly thanks to the nomination of Kevin Warsh, the former governor of the Fed, as the new president of the US central bank, while Jerome Powell’s term expires in May.
The dollar index, which tracks the value of the US currency against six key world currencies, jumped by 0.55 percent to 97.68 points. Against the euro, the dollar gained 0.3 percent, sending the euro down to $1.1815. At the same time, the US currency rose against the Japanese yen by 1.6 percent, reaching 157.20 yen.
The pressure on the yen is felt due to the extraordinary parliamentary elections in Japan, where voters decide on a new convocation of the lower house. Polls show a clear lead for the Liberal Democratic Party (LDP) of Prime Minister Sanae Takaichi, who has only been in office for three months. If the LDP with the coalition secures an absolute majority again, the Prime Minister could implement a stimulating fiscal policy. This scenario further weakens the Japanese currency.
Wall Street saw a sharp decline in the technology sector’s stock prices in the middle of last week, prompting investors to retreat to safer options, including the do*lar. But on Friday, the prices of stocks and precious metals recovered, and the dollar lost some of its previous gains.
“Last week, the dollar mostly moved in the opposite direction of riskier assets, including stocks and bitcoin, but also in the opposite direction of precious metal prices. But on Friday, the prices of stocks, gold and silver recovered, and the dollar lost some of its previous gains,” explains strategist Uto Shinohara of Mesirow Currency Management.
The dol*ar’s recovery is also attributed to market confidence that Warsh will not cut interest rates sharply, given that US inflation remains high.
