Investing.com – The U.S. dollar hit a recent high on Friday while the euro fell as the euro zone economy continued to illustrate the feeble state of the economy.

At 05:00 ET (10:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.6% at 107.614, after earlier rising to its highest level since early October 2023.

The dollar’s head is growing inexorably

The dollar has gained about 3% this month in the wake of Donald Trump’s presidential election victory based on expectations that his policies could reignite inflation and limit the Fed’s ability to cut interest rates.

The release of solid employment data on Thursday also improved the tone as it slowed unexpectedly.

“However, it was some Fedspeak that likely encouraged dollar buying as New York Fed President John Williams – not usually a hawk – said the US had ‘not yet reached inflation levels’ and that the labor market needed to cold further to ease the situation. – ING analysts said in a note.

According to CME’s FedWatch Tool, markets now see a 57.8% chance of a 25 basis point rate cut, up from 72.2% a week ago.

The U.S. currency’s safe-haven status has also been a boon, given the recent escalation in the conflict between Russia and Ukraine.

“Markets are clearly taking the escalation of the Russia-Ukraine war more seriously, which is encouraging wider rotations to acquire assets such as the dollar,” ING added.

The euro fell to its lowest level in two years

In Europe, shares fell 0.8% to 1.0389, falling to a two-year low, with the single currency weighed down by the feeble economic outlook for the region as well as this week’s events in Ukraine.

Business activity in the euro zone took a surprisingly acute turn for the worse this month, a survey showed on Friday, as the bloc’s dominant services industry shrank and manufacturing plunged into a deeper recession.

Preliminary data compiled by S&P Global fell to a 10-month low of 48.1 in November, below the 50-point divide between growth and contraction.

“This information has gone from being almost ignored to a de facto critical contribution to policy decision-making, given the Governing Council’s increased focus on forward-looking growth rates,” ING said.

Data earlier in the session showed Germany, the euro zone’s biggest, recorded less in the third quarter than previously estimated, growing 0.1% in the third quarter of 2024, compared with a flash reading of 0.2%.

fell 0.4% to 1.2536, hitting its weakest level against the dollar since May, as British business output fell for the first time in more than a year.

The preliminary S&P Global Flash Index fell to 49.9 in November – the first time in 13 months below the significant level of 50.0 – from 51.8 in October.

The yen gains after the Japanese CPI

fell 0.1% to 154.38 after Japan’s inflation rose slightly more than expected in October, while the core measure rose above the central bank’s one-year target range, keeping bets on another rate hike by the Bank of Japan.

rose 0.2% to 7.2491, near a four-month high.

So far in November, the yuan has depreciated by as much as 1.8% against the dollar as insufficient signals from China’s stimulus measures also weighed on local markets.