The U.S. dollar sky rocketed to a more than three-week high in the wake of the comments on Tuesday from the Federal Reserve Chair Janet Yellen which pushed markets to assign a higher probability to the prospect of an interest rate hike as early as March.
The dollar index posted its fourth positive session in a row and this is highest levels since January 20 before minimally sliding in early trade on Wednesday as Yellen’s remarks were interpreted as making a point on the possibility of a hike at each upcoming meeting.
While the upwards move in the dollar is making sense in the its context of the latest news from the Fed, The near-term outlook for the greenback is unsure with the conflicting pull of the President Donald’s Trump’s expected economic policies.
The ongoing debate over the dollar’s strength follows an international flare-up last month, in which Peter Navarro, who is Trump’s selected director of the National Trade Council, suspects that Germany is exploiting other countries by keeping the euro “Grossly undervalued”.
Germany’s exchange rate is 15 percent undervalued, according to a research that was released by World Economics, Whose World Price Index that can be compares the fundamental purchasing power parity (PPP) values of currencies against market exchange rates.
PPP looks the cost to buy a hypothetical basket of goods in different countries and suggests that currencies are balanced when the basket is priced the same in each country.