The dollar is rising to the highest level in two years, as the markets absorbed the message of the US Federal Reserve.
Last Friday, the US currency rose to two-year highs against a basket of 6 major currencies.
The US dollar index, which measures the strength of the dollar against six other currencies, rushed across the chart to rise to a two-year high at 108.50, where it is currently trading near the levels of 108.00 as forex traders are keen to bet on the dollar after the latest Fed updates, in light of the scarcity of economic data this week due to the Christmas holidays.
The US central bank caused a wave of appreciation of the dollar after its forecasts about cutting interest rates next year, and said that they will cut interest rates twice next year.
This means that if the economy continues to grow, the labor market remains flexible and does not inflame inflation.
The US dollar was thus almost the only winner as relatively high interest rates keep the dollar attractive to foreign investors and help consumers get better returns on their deposits.
The Japanese yen, on the other hand, fell to a seven-month low before making up some of the loss. The sharp rise in the value of the dollar against the yen came after the Bank of Japan kept interest rates steady instead of raising them.
The same is true for the pound sterling, where the Bank of England kept interest rates steady instead of cutting them, but the vote of members rose to 3 of them expecting a cut at the next meeting instead of one member last month.
The euro against the dollar is also hovering near a two-year low.
