How does ECB rate hike cause US Dollar to gain strength vs Euro?

[smartinvestor30]

I was wondering if someone with a little more knowledge on Macro economics could explain to me how the ECB increasing it's rate a .25 point caused the dollar to gain strength today?

ECB when from 4.0 to 4.25%. By lowering the rate the euro would lose value correct? Raising the rate holds off inflation, strengthening the euro. Based on that why did the US Dollar gain strength vs the Euro it was at 1.5885 and now it's at 1.5715.

[john_for_u80]

Just because ECB told that they are not planning to do rate cuts in future!
Today's rally also was the factor. Dont worry, you will soon see $ going down.
It was 1 of the fake outs you can think of. I think from Monday onwards market is back to its original direction(down).

"Today 00:01am
Asian Market Update: Asian stocks mixed, oil steady ahead of U.S. holiday

- Forex: It looks like today's USD rebound is already running out of steam, with the USD index now approaching a key resistance level at 72.88 (38.2% fibo retracement of the 74.31/72.00 move). Others point out that the 100-day MA for the USD index is seen at 72.96, limiting the greenback's near-term upside in holiday-thinned trade. USD/JPY traded in a tight 20pip range, with traders hearing chatter of Eastern European and Asian sellers ahead of 107. According to the Nikkei business daily, Japanese exporters are unlikely to buy JPY over the coming sessions because they have already locked in favorable rates through futures contracts. AUD/JPY was capped at 102.60, with rumors doing the rounds that stops are building above 102.90. Efforts by troubled U.K. lender Bradford & Bingley to raise £400M were rescued after TPG, a would-be investor, pulled out, the BBC reported, but GBP/USD showed little reaction to the news. EUR/USD moved in a 40pip range during Asian trade, finding support at 1.5680 (38.2% fibo retracement level of the 1.53001/1.5910 move). EUR/USD's upside was capped by hourly resistance around 1.5720/25. USD/Asia generally traded higher, with central bank intervention limiting the upside for USD/KRW and USD/PHP.

- The Asian Development Bank's Kuroda said that Asian currencies are unlikely to come under pressure from balance of payment challenges, and he added that emerging Asia remains a "stabilizing force" in the world. Kuroda does not expect Asia to completely decouple from the G3, and he reiterated his view that inflation is the main challenge facing emerging Asia.

- Equities: At 23:57 EDT Japan's Nikkei is -0.54%, the S&P/ASX200 is +0.72% and the Shanghai composite index is -0.52%. Some analysts expected Japanese investors to do some bargain hunting after the DOW's positive session, but risk appetite remains fragile due to Japan's economic uncertainty. The Nikkei drifted aimlessly between 13,220 and 13,290, with tech stocks tracking the Nasdaq index lower and steel and machinery stocks trading higher. Aussie stocks fared better, with the benchmark S&P/ASX200 index on course to close the week above the psychologically important 5,000 level. Australia's major banks extended their recovery for the third straight session, as investors bet that recent selling has been overdone. Rising inflation pressure spooked South Korean equity investors, while Chinese stocks traded lower after a Chinese official urged the Peoples Bank of China to consider an interest rate hike to combat inflation.

- Commodities: Nymex crude oil held steady above $145/bbl in Asia, with traders unwilling to be short ahead of the 4th of July weekend. Spot gold benefited from steady oil prices and a fading USD rebound, gaining +0.40% between 18:00 EDT and 23:57 EDT to trade at $937.40/oz."

[pedrom727]

Because 25bp hike was expected and already priced into the dollar.