The dollar index broke above the 103 mark for the first time since January 2017, buoyed by expectations of faster Federal Reserve policy tightening, while fears about the economic impact of China’s Covid-19 lockdowns and war in Ukraine boosted the dollar’s safe-haven appeal. Last week, Fed Chair Jerome Powell clarified that the central bank remains committed to taming inflation, currently at 40-year highs, while opening the door for a 50bps interest rate hike in May.
Investors were also monitoring a worsening COVID-19 situation in China after authorities in Beijing expanded virus testing to most of the city, raising concerns about a lockdown of the capital. The most pronounced buying activity was against the euro, which tumbled to levels not seen since April 2017 against the greenback, given the worsening outlook for growth and inflation due to the war in Ukraine.