FOREX-Dollar on track for best year since 2015


Band John McCrank

NEW YORK, December 31The dollar index plunged into calm holiday trading on Friday, but was expected to end 2021 with a gain of nearly 7%, with investors betting the U.S. Federal Reserve will hike rates earlier than most other major economies in a context of rising inflation driven by COVID-19 stimulus initiatives.

The dollar index = USD, which measures the greenback against six major rivals, lost 0.289% to 95.729.

(Graph: world currencies against the dollar in 2021

Set for its best year since 2015, the dollar was supported by an improving U.S. economy and persistent inflation that led to a hawkish turn by the Fed, which is now expected to start raising interest rates as early as March. FEDWATCH

The major currencies’ best performance against the dollar in 2021 was the Canadian dollar, which was roughly stable for the year, helped by expectations that the Bank of Canada will begin to tighten monetary policy as early as January.

The worst performance against the greenback among the majors was the Japanese yen, which is down around 10% this year.

The euro, which is the biggest weight in the dollar index, lost just over 7% in 2021 as the European Central Bank (ECB) “sticks to ultra-dovish monetary policy parameters while as the Fed steps up its decline and looks to hike, ”Scotiabank analysts said in a note to clients.

“We expect the weakening of the common currency to continue next year to the 1.10 mark and possibly beyond, as headwinds remain firmly in place, where only luck (very unlikely) that the ECB increases in late 2022 / early 2023 possibly providing some support, “they said.

The euro fell around 6% on the year against the pound sterling, as appeasing concerns in Britain over the economic impact of the pandemic boosted the British currency, analysts expected to more Bank of England rate hikes in 2022.

While the pound sterling was at its highest level against the euro since February 2020, it was down just over 1% against the dollar for the year.

The biggest lag for the year, although not considered a major currency, was the Turkish lira, which lost about 44% against the dollar in its worst year in two decades, battered by the soaring inflation and the Turkish government’s unorthodox monetary policy.

Friday the euro EUR = was up 0.33% to $ 1.1362.

Sterling GBP = D3 was up 0.21% to $ 1.3527.

Yen JPY = was down 0.03% to 115.075 per dollar.

Turkish lira TRY = D3 was up 0.98% to 13.1835 per dollar.

In cryptocurrencies, bitcoin BTC = BTSP was up 1.66% to $ 47,931.97 and was expected to end the year with a gain of around 65%, but well below its November high of $ 69,000.

Global exchange rates in 2021

(Edited by Jason Neely)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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