The dollar surged to near-14 year highs against the euro yesterday after the Federal Reserve raised interest rates for the first time in a year and indicated that there could be another three next year.
The U.S. currency has been rising across the board in the wake of the Fed’s statement, which saw the central bank raise its main interest rate by a quarter percentage point to a range of 0.50 percent to 0.75 percent.
The advance came after the Fed indicated three more rate hikes next year instead of two. That means potential returns on dollar holdings will be even higher.
“What is more important, though, is that despite the Fed signaling a desire to raise interest rates at a faster pace, there was no panic in the markets,” said Craig Erlam, senior market analyst at OANDA. “Rate hikes are finally seen as a positive once again rather than something that’s going to kill any rallies.”
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