The dollar rose to its nine-month high against a basket of major currencies on Friday and posted its best week in a year as investors added bets that US President-elect Donald Trump’s government would accelerate inflation In the world’s largest economy.
Investors are hopeful that Trump’s proposals to deport illegal immigrants, renegotiate free trade agreements and unleash important fiscal stimulus measures will boost inflation in the United States.
Backed by a better consumer confidence report than expected and strong gains against the euro and the Canadian dollar, the dollar index advanced to its highs since February 1.
The US currency extended its gains against the Chinese yuan and the Mexican peso at historic levels on concerns that emerging markets could suffer the worst impact if Trump concretes its campaign pledges on trade protectionism.
China set the yuan with another drop of 0.2% to 6.8120 units per dollar, while in the less controlled international market the exchange rate reached 6.85 yuan per dollar, with expectations of further losses. It was the lowest level of the yuan against the dollar in six years.
The Mexican peso sank 3 percent to a record low of 21,395 pesos per dollar.
Meanwhile, the Brazilian real and the South African rand, representing two of the world’s largest emerging markets, fell more than 2 percent.
The euro fell to its lowest since March against the dollar, touching $ 1.0836, while the Canadian dollar slipped to its lowest level since February.
The dollar, meanwhile, wiped out most of its losses against the yen to trade with little change from Thursday’s closing levels.
In the week, the US currency appreciated 3.5 percent against the yen.
The dollar index, which measures the performance of the US currency against a basket of six major currencies, rose more than 2 percent this week, its best weekly performance since November 2015.
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