Investing.com – The U.S. dollar rose to recent highs on Friday, with the Federal Reserve sounding more hawkish than other European currencies as sterling continued to lose ground.

At 0500 ET (0900 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 105.365, just off last week’s monthly high of 105.80 .

Dollar supported by a relatively hawkish Fed

The American currency enjoys great interest despite data indicating an economic slowdown.

The latest data from the housing and labor markets were pliable, and incoming data, which will be released later in the session, should show a slowdown in activity.

However, Fed officials continue to urge caution and more data before agreeing to rate cuts, and at the U.S. central bank’s latest meeting, its forecast for interest rate cuts this year was lowered to one of the previous three.

In contrast, the company began cutting interest rates earlier this month, has cut rates twice, and looks set to begin cutting rates in August.

“The surprising cut in interest rates by the Swiss National Bank and the dovish stance of the Bank of England reinforced the belief that central banks in Europe are well ahead of the Federal Reserve in terms of interest rate cuts, which is a positive development for the dollar,” ING analysts said in a note.

The pound sterling is weakening in the face of August’s cut

fell 0.1% to 1.2652, with sterling nearing a five-week low following the Bank of England’s latest policy meeting.

The BoE left interest rates unchanged, but some policymakers said the decision not to cut interest rates was “perfectly balanced”, raising expectations that policymakers would agree to a cut when they next meet in early August.

The pound was somewhat supported on Friday by data showing Britain surged last month after ponderous rains kept customers away from shopping in April. Sales volumes rose 2.9% in May, compared with a revised decline of 1.8% in April.

fell 0.1% to 1.0692, after falling about 0.4% in the previous session after tender economic data deepened political unrest in the region.

Economic growth in the euro zone slowed sharply this month, with the bloc’s industry showing some signs of weakening while the economic downturn took an even worse turn.

The preliminary reading for the region, compiled by S&P Global, fell to 50.8 this month from 52.2 in May, dashing expectations in a Reuters poll for a rise to 52.5.

“With dovish signals from the main European counterparts of the European Central Bank (BoE and SNB) and investor nerves regarding fiscal and political developments in the EU, the euro will understandably come under some pressure in the second half of this week,” ING added.

Yen falls to eight-week low

In Asia, shares fell 0.1% to 158.81, with the pair falling slightly after previously rising to a fresh eight-week high above 159.

The Japanese currency remains on the defensive following last week’s decision by the Bank of Japan to refrain from limiting its bond purchase incentives until its July meeting.

The US Treasury added Japan on Thursday to the list of countries it is monitoring for potential currency manipulator designation, following powerful BoJ intervention to support the yen, which has hit a 34-year low.

quoted slightly higher at 7.2611, with the Chinese yuan remaining under pressure amid doubts over the strength of the country’s economic recovery.