Dollar climbs to six-week peak on rate hike expectations By Reuters
2023-02-17 15:20:03
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By Rae Wee

SINGAPORE (Reuters) - The dollar surged on Friday to hit a six-week high against a basket of currencies as a bout of resilient economic data out of the United States raised market expectations that more interest rate hikes were in the offing.

Data on Thursday showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while other data revealed that monthly producer prices increased by the most in seven months in January.

The latest data releases gave the U.S. dollar a leg up, knocking sterling, the euro and the Japanese yen to fresh six-week lows on Friday.

That pushed the to a six-week top of 104.44. It was last 0.28% higher at 104.40, and was on track for a third straight week of gains.

The euro was last 0.34% lower at $1.0635, having bottomed at $1.0632 earlier in the session, while sterling slid 0.32% to $1.1949.

Similarly, the tumbled to a six-week trough of $0.6216, and likewise for the , which plunged more than 0.6% to $0.68325, its lowest level since Jan. 6.

"The U.S. economy, from recent data, shows that it's still healthy. It doesn't seem to be going into a recession any time soon," said Tina Teng, market analyst at CMC Markets.

"The markets are pricing for higher-for-longer rates."

Thursday's reports followed data from earlier this week that showed robust growth in U.S. retail sales in January and signs of sticky inflation, stoking fears that the Federal Reserve would have to raise rates higher than previously expected.

U.S. Treasury yields have also surged on the back of further hawkish rate repricing, with the two-year yields last at 4.6762%.

The benchmark climbed to a top of 3.9010% on Friday, its highest since Dec. 30.

Markets are now expecting rates to peak at about 5.29% by July.

Fed officials have also signalled that the U.S. central bank has further to go in raising rates, with two policymakers saying on Thursday that it likely should have lifted interest rates more than the 25-basis-point hike earlier this month.

Against the Japanese yen, the dollar surged over 0.6% to a more than one-month peak of 134.815, and was eyeing a weekly gain of roughly 2.5%, its best week since last August.

Japan's government picked academic Kazuo Ueda as its new central bank chief on expectations he can help keep inflation on target and sustain economic growth and wage hikes, finance minister Shunichi Suzuki said on Friday.

"It is expected that the most important task of nominee Governor Ueda will be to guide the BOJ to an exit of its ultra-accommodative (quantitative and qualitative easing) policies," Jane Foley, head of FX strategy at Rabobank.

"That, however, does not suggest that the BOJ will be in any rush to change direction."

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