The United States Dollar pulled back slightly on Thursday after hitting a 20-year high on the back of rising interest rates and global demand for haven currencies.

The dollar index rose to 107.05 in the previous session, the highest in 20 years before pulling back to 106.57 at 11:07 am Nigerian time.

Against the Euro common currency, the U.S. Dollar gave back some of its gains on Thursday to trade at 1.0213, up from 1.0173 attained after dropping below 1.0350 support levels.

Similarly, the greenback pared gains against the British Pound to 1.2009 despite over 40 British lawmakers resigning their positions and calling for the resignation of Prime Minister Boris Johnson enmeshed in a series of scandals.

The value of the United States Dollar rose in recent weeks after it became clear that the Federal Reserve won’t be halting its rate increase anytime soon. The surge in demand for the United States Dollar was to avoid paying excessive borrowing costs going forward and also to ensure cash availability going into recession, known cash is king.

The Federal Reserve is expected to raise borrowing costs by another 50 basis points to 75 basis points in the month of July as it continues to battle 40 years high inflation rate of 8.6%.

This persistent increase in borrowing costs is expected to weigh on new job creation, new investment, earnings, and subsequently, drag on consumer spending that over the years has sustained the world’s largest economy.

Overseas orders will start waning American goods become more expensive to holders of foreign currencies. This, Investors King predicted would hurt manufacturing activity.

The United States Dollar dropped to a week low against its global counterparts on Wednesday after the Federal Reserve raised interest rates by 0.25% against the widely expected 0.75%.

The move came as a surprise to financial market operators for one reason, the U.S. inflation is at a record-high of 8.5%. However, the Fed highlighted rising global risks and uncertainties due to the ongoing COVID-19 restrictions in China and the Russia Ukraine war.

This, the central bank explains necessitates caution.

“The market was pricing in essentially a 50/50 chance that you see a 75 basis point hike by July, between June and July, and so I think the most important takeaway here that I think the market was really fixated on, was whether or not a 75 basis point hike is on the table, and he (Powell) basically pushed back on that,” said Mazen Issa, senior fx strategist at TD Securities in New York.

The United States dollar index declined to $102.48 from $103.64 it peaked on Wednesday immediately the Fed made its decision.

Against the Euro common currency, the United States dollar lost 0.82% to $1.0622. While against the Pounds Sterling and Yen, the green back dropped to $1.2625 and $129.12, respectively.

Stocks and other risky assets rose after Fed suggested it could curb inflation without necessarily triggering a recession.

The United States Dollar gained against safe-haven currencies on Wednesday after the Federal Reserve committee announced it has approved plans to speed up pandemic stimulus withdrawal process.

The Dollar Index rose to a three-week high of 96.87 on Wednesday before dropping to 96.14 on Thursday during the London trading session.

However, against the Japanese Yen, a known haven currency, US Dollar sustained its gain at 114.153, up from 113.52 on Tuesday. But the greenback failed to keep its gain against the Swiss Franc after hitting 0.92940 on Wednesday. It drops to 0.92318.

This was after the US Federal Reserve maintained interest rates at 0 to 0.25 percent to achieve maximum employment despite the surge in inflation to a four-decade high.

The Committee, however, agreed to reduce monthly stimulus purchases by $20 billion for treasure securities and $10 billion for agency mortgage-backed securities.

“Beginning in January, the Committee will increase its holdings of Treasury securities by at least $40 billion per month and of agency mortgage‑backed securities by at least $20 billion per month. The Committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.

“The Federal Reserve’s ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.”