NEW YORK: The strong US dollar, boosted further by the Federal Reserve's decision to raise interest rates, could pose challenges to President-elect Donald Trump's economic agenda.
The greenback shot to fresh multi-year highs against the euro and other currencies Thursday following the Fed's move Wednesday to increase the benchmark lending rate and its signal about additional rate increases in 2017.
The US currency already had been on an upward trajectory after Trump's election, amid expectations he will push policies that could unleash higher growth and inflation, leading to more interest rate hikes.
Many analysts expect the dollar to continue to rise, after gaining five percent against a basket of six currencies since Trump's election.
"We would expect the dollar to continue to strengthen," said Wells Fargo analyst Eric Viloria. The Fed's plans to raise rates further contrasts with "what a lot of other major central banks are doing."
Trump himself has warned of the negative effects of a strong dollar, saying during the campaign that "it sounds better to have a strong dollar than it actually is."
"If we raise interest rates and the dollar gets too strong, we're going to have some major problems," Trump told CNBC in May.
Investors flock to markets that have higher interest rates seeking better returns, which creates more demand for dollars.
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