Early European trade on Friday saw a strengthening of the US dollar while a significant threshold was crossed by the Chinese yuan as risk appetite was dampened by worries about increasing interest rates and a probable recession.

The Dollar Index, which compares the value of the dollar to a basket of six other currencies, rose 0.1 per cent to 109.545 at 03:10 ET (07:10 GMT), not far from its two-decade high of 110.79.
Both the World Bank and the International Monetary Fund issued warnings about an imminent global economic slowdown late on Thursday. Indermit Gill, the World Bank’s chief economist, expressed alarm about a period of low growth and high inflation known as “generalised stagflation.”

As many central banks actively tighten monetary policy to confront inflation at unprecedented levels, concerns about a worldwide recession are mounting.

The Bank of England is anticipated to raise interest rates for the eighth meeting in a row, while the Federal Reserve is widely anticipated to raise rates by 75 basis points next week.
The riskier currencies have been affected by this pessimistic economic prognosis, with the dollar being the primary gainer.

For the first time in two years, the Chinese yuan traded over the important 7-per-dollar level, with USD/CNY up 0.3% to 7.0121, despite data showing China’s economy to be surprisingly resilient, with manufacturing output growing faster than anticipated and retail sales growing at the fastest rate.