Kevin Buckland

TOKYO, Reuters – Friday’s US dollar pressure remained high despite the Bank of England (and European Central Bank) adopting more hawkish stances on Friday than the markets expected. This gave the U.S. dollar a boost and boosted sterling and the euro.

After a 0.6% two-day slide, the, which compares the currency to six major peer currencies, including the British pound and the euro, opened the Asian session at 95.933. It dropped as low as 95.850 Thursday, the lowest since Dec. 8.

After soaring as high as $1.3355 in the previous session on Nov. 24, Sterling is now at $1.33305.

Following touching its highest point this month at $1.13605 0,5%, the euro remained steady at $1.13315. This was after the ECB announced plans to remove stimulus in the coming quarters. However, it also stressed policy flexibility.

“A cautious ECB taper and a surprise BoE hike likely leaves (the dollar index) heavy near-term, especially given lopsided long USD positioning into year’s end,” Westpac strategists wrote in a client note.

They stated that “but weakness unlikely does not extend beyond low 95s” in the dollar index. The Fed is “streets ahead of” the ECB regarding tightening cycles and dips to the mid-95 levels are a buying opportunity.

The Fed announced Wednesday that it will accelerate its tapering of the bond-buying stimuli to close the program in March. This would allow for three quarter-point rate rises next year. Initial surge to the dollar index’s three-week peak, but then it began its slump.

These divergent paths of major central banks highlight deep uncertainty about the impact Omicron’s fast-spreading variant on economies. Also, about the amount each bank should be doing to counter surging inflation. Inflation is more severe in Europe and the United States than it is in the United States.

While the Bank of Japan may announce a policy decision on Friday night, it is not expected to make any changes to the fundamental elements of their ultra-loose policy. Inflation remains well below the bank’s target.

Dollar edged up to 113.76yen after the currency had largely moved in an 112.5-114.3 area over the past three week.

After jumping from $0.7224 to an overnight high of more than three weeks, the risk-sensitive Australian currency fell 0.06% to $0.7178.