The Dollar Has Reached a Six-Week High as Interest Rate Expectations Rise.
On Friday, the dollar rose to a six-week high against a basket of currencies. A string of positive economic data from the United States raised market expectations of further interest rate hikes.
According to data released on Thursday, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week. At the same time, monthly producer prices increased by the most in seven months in January.
The most recent data releases boosted the US dollar, sending sterling GBP=D3 to a new six-week low of $1.1952 on Friday.
Similarly, the kiwi NZD=D3 fell to a six-week low of $0.6228, while the euro EUR=EBS fell to $1.0652, its lowest level since January 9.
The US dollar index =USD rose to a new six-week high of 104.31 against a basket of currencies, putting it on track for a third straight week of gains.
"According to recent data, the US economy is still in good shape. It does not appear that the economy will enter a recession anytime soon "Tina Teng, market analyst at CMC Markets, agreed. "The markets are pricing higher-for-longer interest rates."
Thursday's reports came on the heels of earlier this week's data, which showed robust growth in U.S. retail sales in January and signs of sticky inflation, fueling fears that the Federal Reserve would have to raise rates sooner than expected.
Treasury yields in the United States have also risen in response to further hawkish rate repricing, with the two-year yield US2YT=RR last at 4.6762%.
The benchmark 10-year US Treasury yields US10YT=RR reached 3.900% on Friday, the highest since December 30.
Markets now anticipate that rates will peak just below 5.3% by July. FED WATCH.
Fed officials have also indicated that the US central bank has further to go in raising interest rates, with two policymakers saying on Thursday that the Fed should have raised rates more aggressively than it did earlier this month.
In other news, the Australian dollar AUD=D3 fell 0.46% to $0.6848, close to Thursday's more than one-month low of $0.68405.
The dollar jumped to a new six-week high of 134.69 against the Japanese yen and was on track for a weekly gain of nearly 2.5%, its best week since last August.
According to finance minister Shunichi Suzuki, Japan's government chose academic Kazuo Ueda as its new central bank chief with the expectation that he will help keep inflation on target while also sustaining economic growth and wage increases.
"It is expected that nominee Governor Ueda's most important task will be to guide the BOJ out of its ultra-accommodative (quantitative and qualitative easing) policies," said Jane Foley, head of FX strategy at Rabobank. "However, this does not imply that the BOJ will be in any hurry to change course."