Dollar Bounces Back As Fed Hits Pause Button by ProQuest


The dollar rose to a two-month high against the euro last month after the Federal Reserve signaled a pause in its easing cycle, and European economic data came in weaker than expected. While the greenback is unlikely to continue to rally in the face of a still-hawkish European Central Bank (ECB), the dollar could be entering a period of relative stability, analysts say. The conclusion to be drawn is that the ECB is prepared to raise interest rates if second-round effects from elevated energy and food prices begin to emerge. Meanwhile, the dollar got a boost from comments by Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, who warned that inflation could become embedded in the US economy. The dollar's recent appreciation has sparked the notion that the euro's seven-year bull run was coming to an end.

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