The US dollar climbed higher on Friday near its best level since 2003 as the greenback maintained its powerful surge against other major currencies for the second week in a row. The US currency is receiving its strength from expectations of an increased fiscal spending under Donald Trumpâs administration.
Investors expect that the US President-elect will introduce economic policies that will include cuts to corporate taxes, increased government spending, and reduced financial regulations once he enters the White House next January. As a result, economic growth would be boosted and inflation will likely rise closer to the target of the Federal Reserve at 2%, which will prompt the central bank to raise interest rates faster.
These expectations are fueling the dollarâs rapid rally, which was further stoked by a flood of remarks from Federal Reserve officials that support increasing interest rates in December. Markets reached near certainty that the Federal Open Market Committee will push rates higher following the testimony of Federal Reserve Chair Janet Yellen in front of Congress on Thursday.
Meanwhile, the euro came under pressure following comments from European Central Bank President Mario Draghi that support maintaining the bankâs monetary stimulus. Traders speculate that the euro could fall to parity with the US dollar in December, especially as the shared currency might receive more negative blows from ECBâs monetary policy decision on December 8 and the Italian constitutional referendum on December 4, which decides the future of reforms suggested by Prime Minister Matteo Renzi.
EUR/USD traded at 1.0587 as of 21:53 GMT after touching 1.0572 at 15:37 GMT, the pairâs lowest level for the day. EUR/USD started trading today at 1.0625.
The Dollar Index, which measures the performance of the US currency against its major peers, rose to 101.32 at 21:45 GMT, from 100.89 on Thursday.
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