Investing.com – The dollar rose against a basket of currency on Friday, buoyed by a slump in sterling, which fell to its lowest level in April after the UK general election triggered renewed political uncertainty ahead of the start of Brexit negotiations.
GBP/USD pared some of its losses to trade above $1.27, down 1.68%, as investors hoped that UK Prime Minister Theresa May’s announcement that she would form a government with the support of the Democratic Unionist Party will spur a fresh Brexit strategy, potentially avoiding a ‘hard Brexit’.
Deputy leader of the Democratic Unionist Party (DUP) insisted that his party is ready to face up to the “challenges of Brexit” while Arlene Foster, leader of the DUP, said that “no-one wants to see a ‘hard’ Brexit”.
Sterling fell to $1.2635, the lowest level since April 18, after the result of the general election sparked political uncertainty, as Prime Minister Theresa May’s Conservative party failed to secure a majority in parliament.
The dollar was the main beneficiary of the slump in sterling, as the greenback remained on track to close higher for the week ahead of the Federal Open Market Committee meeting next week.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.28% to 97.23.
EUR/GBP gained 0.76% to 0.8800 while EUR/USD bounced off session lows to $1.1199.
The single currency remained under pressure, after the European Central Bank on Thursday, scaled back its inflation expectations for the next two years while ECB president Mario Draghi suggested that interest rates were likely to remain at current levels for an extended period of time.
USD/JPY rose 0.48% to Y110.42, while USD/CAD fell by 0.46% to $1.3447.