By Alun John

HONG KONG, (Reuters) – The dollar climbed higher Friday against a basket and a euro. This was supported by the possibility of a faster pace in Federal Reserve interest rate hikes.

It reached a high of 99.904 during early Asia trade. This is its highest level since May 2020.

This week the index rose 1.2%, which is its largest gain in a month. The index’s rise was supported by Fed policy makers making hawkish statements, calling for an increase in interest rates to slow inflation.

This week, the Fed released the minutes from its March meeting. It was clear that many participants wanted to see interest rates rise in increments of 50basis points over the next few months.

Simon Harvey of MonFX’s FX analysis, stated that recent gains in the Dollar Index seem to be sustainable for the rest of the month. Markets settle on the notion of an aggressive Federal Reserve in Q2 and they are able to sustain these gains.

“However, we believe further upside in the dollar is unlikely without a recalibration of the Fed’s terminal rate in markets. The limited upside available in Fed pricing currently based on current fundamentals is the main reason for this.

The euro fell to $1.0856 on Friday morning, despite the rally in the dollar. This was due to new Western sanctions against Russia and the European Union’s move towards an August ban on Russian coal.

Harvey stated that the European Central Bank also faces inflation. “While ECB members sound relatively hawkish about the recent inflation shock and providing with a modicum support around the 1.09 handle,” Harvey said.

Uncertainty surrounding the French election result has caused the common currency to sink. The far-right candidate Marine Le Pen wins the polls, threatening incumbent Emmanuel Macron’s re-election chances. But, the polls continue to show Macron leading.

The dollar gained more against the Japanese currency, climbing to as much at 124.23. Its highest point in over a fortnight and surpassing its seven-year peak of 125.1.

After plummeting in March, the yen is now stable. However, the U.S. continues to raise interest rates while the Bank of Japan intervenes in the bond markets in an effort to maintain low rates.

After gaining significantly in the last few weeks, commodity currencies such as Canadian and Australian dollars saw their prices drop slightly.

The lowest end of the recent range for Sterling, $1.30695, was reached by sterling.

Bitcoin traded at $43,300 in cryptocurrency markets, just $22 less than its overnight low of $42,742.