US Dollar poised for best week since November after post-Fed tumble
Frankfurt (Mar 25) The dollar headed for its best week since November, climbing from a nine-month low reached last week, as Federal Reserve policy makers hinted interest rates may rise in the next few months. The US currency held advances from yesterday versus most of its major peers after Fed Bank of St Louis President James Bullard said officials may be getting close to lifting rates again, provided growth continues as forecast. Government releases yesterday showed fewer jobless claims than forecast in the week through March 19 and durable goods orders fell less than projected last month. Investors are slowly shifting back into the greenback after a cautious tone from Fed policy makers at their March 15-16 meeting sent the dollar tumbling.
Traders are refocusing on the US economy to evaluate whether incoming data can sustain a rebound in the currency. Employers probably continued to bolster the headcount this month, a report April 1 is forecast to show. “The dollar, from a broad perspective, I think there’s probably still some more room to strengthen, if the US data’s good,” said Eric Stein, the Boston-based co-director of global fixed income at Eaton Vance Corp, which oversees around US$302 billion (RM1.2 trillion). “Again, we get a dovish Fed statement that seems to lead to hawkish commentary afterwards.”
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, is set for a 1.2 per cent gain this week, the biggest since the period ending Nov. 6 and was little changed at 1,199.92 at 8.17am in Tokyo. The dollar bought ¥112.76 from 112.90 in New York Thursday and was at US$1.1179 per euro from US$1.1174. Markets in parts of Asia, including Hong Kong and Singapore, Europe and the US are closed today for national holidays.
Mixed signals US data have steadily improved over the last few weeks, with Bloomberg’s gauge of economic surprises advancing to the highest in more than a year. “The next rate increase may not be far off provided that the economy evolves as expected,” Bullard said in New York yesterday. Futures contracts show traders see a 6 per cent likelihood of a rate increase at policy makers’ meeting next month, and a 38 per cent probability in June. The Bloomberg Dollar Spot Index has fallen 2.6 per cent this year, after a 9 per cent gain in 2015 and an 11 per cent rally the year before. “The data should continue to strengthen, it should continue to surprise a little bit and that should be sufficient for them to go in June,” Binky Chadha, chief global strategist at Deutsche Bank AG, said in an interview on Bloomberg Television. The upside for the greenback may be limited as “the dollar itself has also priced in a lot.”
Source: Bloomberg
