The fate of the U.S. dollar will be pivotal for global financial markets this week as the world's two most powerful central banks battle the commodity-driven inflation that has been spurred by the greenback's long slide.
The dollar has been left on a knife edge after a week in which the Federal Reserve and the European Central Bank seemingly competed for the prize of the toughest inflation fighters.
And as a stream of global economic data sent conflicting signals on rising inflation and slowing growth, the outlook for all financial markets has rarely been hazier.
"Concerns about inflation have increased considerably among all central banks. Both (the Fed and the ECB) have signalled they will have tighter monetary policy than people had expected," said Dale Thomas, head of currency management at UK-based fund Insight Investment.
Thomas said the desire to have a strong U.S. dollar was undermined by the fact that the rest of the world is tightening policy when the U.S. isn't. "It wants all things without taking pain," he added, referring to the U.S. position.-
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