Dollar Set for Biggest Weekly Gain in Two Months on Fed Outlook

Washington (Jan 17)  The dollar was set for its biggest weekly advance against major peers in two months before Federal Reserve Bank of Richmond President Jeffrey Lacker speaks today.

The greenback rose versus most of its 16 main counterparts as U.S. data on retail sales, New York manufacturing and initial jobless claims released this week all beat economists estimates, bolstering bets the Fed will continue to reduce monetary stimulus. The yen’s losses were limited versus the greenback after U.S. Treasury Secretary Jacob J. Lew said Japan can’t rely on the exchange rate for economic advantage.

“The Fed will not slow the pace of tapering,” said Yuki Sakasai, a currency strategist at Barclays Plc. in New York. “The dollar is being bought back on the week. I don’t think it will fall much further.”

The Bloomberg Dollar Spot Index was little changed at 1,029.85 as of 10:27 a.m. in Tokyo. The gauge, which measures the greenback’s value against a basket of 10 major currencies, has risen 0.6 percent since Jan. 10, poised for the biggest weekly gain since Nov. 1.

The greenback was at $1.3619 per euro from $1.3620, having advanced 0.4 percent this week. The yen was little changed at 104.36 per dollar after rising 0.2 percent yesterday. Japan’s currency has weakened 0.2 percent this week.

Jobless claims decreased by 2,000 to 326,000 in the week ended Jan. 11, a Labor Department report showed yesterday in Washington. The median forecast of economists surveyed by Bloomberg News called for 328,000.

Fed policy makers said on Dec. 18 they will cut monthly bond buying to $75 billion from $85 billion, citing an improving labor market. Lacker, who doesn’t vote on monetary policy this year, said on Jan. 10 that he “would expect a similar reduction in pace to be discussed at the upcoming meeting.”

The Federal Open Market Committee will reduce purchases by $10 billion at each meeting to end the program this year, according to the median forecasts of economists in a Bloomberg survey. It next meets Jan. 28-29.