Us dollar enjoys strong start to 2015

Photo: Toddy

"Based on its current assessment, the Federal Reserve judges that it can be patient in beginning to normalize the stance of monetary policy," a statement released yesterday by chair Janet Yellen said.

The statement urged caution and patience but also noted that the US economy continues to improve, a trend that leaves the US dollar increasingly strong against other major currencies.

Indeed, the European Central Bank has introduced Quantitative Easing this month, leaving the single currency weakening amid growing uncertainty. At the same time, the Bank of England is expected by economists to keep its interest rates at a record low 0.5 per cent until "at least October", according to a Reuters poll, a significant turnaround from the early 2015 increase once predicted.

The dollar is therefore potentially the only central bank in a developed country to be raising its interest rates this year, which Bloomberg reports led to the greenback heading for its "highest close in more than a decade", gaining against most of the US currency's 16 major counterparts.

"Just by doing nothing the Fed appears to very diverse compared with other central banks," said Jane Foley, a senior strategist at Rabobank International in London.

"Even if they don’t hike rates in the summer” it “will be hiking interest rates when other central banks are easing policy."

Agents have already reported rising demand for European property, thanks to American investors' increased spending power in the face of the weaker euro. Even Canada's currency has been beaten back by the dollar's growth, slipping to 79.87 cents US - the first time it has been below 80 cents US in almost six years, notes CBC.

Asian currencies have also fallen against the dollar, notes Bloomberg, with India's rupee suffering its biggest drop in six weeks.