NEW YORK- The dollar index dipped on Friday in quiet holiday trading, but ended 2021 with a gain of nearly 7 percent as investors bet the US Federal Reserve will raise rates earlier than most other major economies amid surging inflation driven by COVID-19 stimulus initiatives.
The dollar index, which measures the greenback against six major rivals, was down 0.289 percent at 95.729.
Set for its best year since 2015, the dollar has been supported by an improving US economy and persistent inflation that led to a hawkish turn by the Fed, which is now expected to begin raising interest rates as early as March.
The best performer of the major currencies against the dollar in 2021 was the Canadian dollar, which was around flat for the year, helped by expectations the Bank of Canada will begin tightening its monetary policy as soon as January.
The worst performer versus the greenback among the majors was the Japanese yen, which is down around 10 percent this year.
The euro, which makes up the biggest weighting in the dollar index, was down a little more than 7 percent in 2021, with the European Central Bank (ECB) “sticking to ultra-dovish monetary policy settings while the Fed accelerates its taper and looks to hiking,” analysts at Scotiabank said in a note to clients.
