Dollar achieves its first weekly gain since February

The dollar headed today, Friday, for its first weekly gain in nearly two months, as investors increased bets that the Federal Reserve (the US central bank) will raise interest rates in May, while the euro received some support from the sudden recovery of the euro zone economy in April.

According to “Reuters”, the dollar index, which measures the performance of the US currency against six other major currencies, rose 0.2 percent during the day and headed towards achieving weekly gains of 0.4 percent, its first since late February.

The pace of recovery in the eurozone unexpectedly accelerated this month, thanks to a boom in demand for the services sector that offset the growing decline in manufacturing industries.

Preliminary surveys showed the same momentum in Germany and France, the two largest economies in the eurozone

The euro fell 0.1 percent to 1.0959 against the dollar, but it recovered from its lowest level during the session at 1.0938 against the dollar. It rose 0.3 percent to 88.84 pence against the British pound

But talk about the dominance of the dollar was the one that prevailed this week. Federal Reserve officials were keen to emphasize that inflation remains uncomfortably high and interest rates must continue to be raised.

Financial markets show that dealers believe that the US central bank will raise interest rates by a quarter of a basis point next month, which in theory supports the dollar, but this will be quickly followed by a series of interest rate cuts as the economy slows.

Thursday’s data added to recessionary fears because it showed a rise in the number of new applications for unemployment benefits, while factory activity in mid-Atlantic states hit its lowest level in three years this month.

Sterling took a hit from a drop in retail sales in Britain in March after bad weather and high inflation deterred British consumers from shopping.

The pound fell in the latest trading 0.3 percent to 1.2404 against the dollar, after declining to 0.51 percent earlier.

The yen rose against the dollar after data showed the stability of the Japanese consumer price inflation index above the central bank’s target for the March rate, which increased pressure on the Bank of Japan to reverse its monetary easing policy.