Peter Nurse

Investing.com. The dollar rose in European trading Friday morning, on track for the best week since June. This is because traders expect tighter U.S. currency policy.

The Dollar Index (which tracks the greenback in relation to six currencies) traded 0.1% lower at 94.315 ET (755 GMT). This is near the highest level since September 2020. It has gained more than 1% this week and was the biggest weekly increase since June.

The yen fell 0.1%, to 111.16. This was due to Japan’s improving business mood for the fifth consecutive quarter in September. The yen edged down to 1.1579. This is near the lowest level since July 2020.

The Federal Reserve has been preparing for foreign exchange traders to start positioning them for a tapering of its asset purchases prior the year’s end and interest rate increases starting in 2022’s second half. 

Jerome Powell of the Fed stated Wednesday, that the Fed’s most pressing issue right now is resolving the “tension” between high inflation levels and rising unemployment.

U.S. was slightly revised higher Thursday. Friday’s focus will be on Friday’s release of the, which is the inflation measure that the Federal Reserve uses in setting policy.

It is anticipated that this will rise by 0.2% in August, and 3.6% over the year. This level remains unchanged from July 1991, when it was at its highest point since May 1991.

The stock market traded at 21.8660 on Friday, following sharp gains by the crown on Thursday due to the Czech National Bank raising interest rates 75 basis points. It is its largest increase in interest rates since 1997. 

This was more than the 50-basis points move market had already priced in. This raised the two-week repo rate by 1.50%.