Dollar Approaches 20-Year High Amid Global Market Sell

JAKARTA - The dollar index hovered near 20-year highs against other major currencies on Friday, as a sell-off in the face of fears of a global recession propelled the safe-haven currency.

European stocks opened lower and headed for their worst week in two months, following losses on Wall Street.

The US currency has been standing tall on expectations that the Federal Reserve will tighten monetary policy faster than its peers to stem runaway inflation.

The closely watched US jobs report due Friday could strengthen the case for aggressive tightening, analysts said.

Economists had expected a solid 391,000 US jobs added last month, according to a Reuters poll.

The dollar index, which tracks its performance against a basket of six major rivals, rose as much as 0.5 percent in early European trading hours to hit a fresh 20-year high of 104.07.

But then lost ground in volatile trading and was last broadly flat at 103.55. It appears to be a touch and go whether the index will post its fifth straight week of gains, rising 0.3 percent on the week.

The Fed raised interest rates by half a percentage point Wednesday, May 4, 2022- its biggest jump in 22 years - but the dollar temporarily cooled on Fed Chair Jerome Powell's comments that policymakers are not actively considering 75 basis point hikes in the future.

"Financial market conditions will need to tighten further to change the central bank's thinking on inflation risks and thus the US dollar will remain on a strengthening path for now", currency analysts at MUFG said in a note.

The euro lost as much as 0.5 percent against the dollar in early European trading hours, before reversing. The single currency was last up 0.2 percent at 1.05555 dollars.

Sterling was broadly flat after earlier dropping below $1.23 for the first time in nearly two years, a day after Britain's central bank (BoE) sent a stern warning that Britain was at risk of a double recession and inflation above 10 percent.

The BoE also joined the Fed in raising interest rates, raising them by a quarter of a percentage point to 1.0 percent.

The yen was slightly lower against the dollar, down 0.2 percent to 130.46 yen per dollar.

In the cryptocurrency market, bitcoin weakened slightly to trade slightly above $36,000.