Dollar hits 20-year high vs euro as Fed hikes rates again

NEW YORK: The dollar surged to a near 20-year peak against the euro on Wednesday as the Federal Reserve enacted another aggressive interest rate hike in response to runaway inflation.

The euro to dollar ratio hit 0.9814 for the first time since October 2002, just months after the currency became the sole legal tender of 12 European Union states. Wall Street stocks, which had been in positive territory prior to the 1800 GMT Fed statement, tumbled into the red after the announcement. All three major indices were in negative territory, with the broad-based S&P 500 down 0.6 percent at 3,834.10.

The latest Fed statement included interest rate projections for the end of 2023 and 2024 that are higher than the previous forecasts, signaling the US central bank now sees the need for a more prolonged monetary tightening cycle in light of inflation trends.

“Overall, the message from the (Fed) remains hawkish, with the Fed committing to further rates hikes to combat inflation and keep inflation expectations anchored,” said a note from the High Frequency Economics.