Money markets priced 32 BPS of rate hikes in March and as many as 124 BPS in incremental increases before the end of the year. Even as broader currency markets quietened somewhat behind an eventful week in global markets punctuated by a hawkish Federal Reserve meeting, the dollar was in the spotlight.
U.S. Treasury yields steadied in London trading, with 10-year yields edging negligibly higher but staying well below the two-year peaks of nearly 1.9% hit on Monday.
The euro nursed losses on Friday, with the single currency advancing marginally higher to $1.1152 from Thursday’s 20-month low of $1.1131.
Major currencies hovered sideways in Asian trading before the Chinese New Year holidays next week even though U.S. yields were higher.
Data Supporting the Dollar
Data has also helped the dollar, with the U.S. economy registering its best yearly growth in almost four decades. More data, including the U.S. work cost index and University of Michigan sentiment surveys on Friday, can reaffirm the Fed’s hawkish stance.
The yen drifted at 115.43 to the dollar. In contrast, the Australian and New Zealand dollars languished – the kiwi dropping narrowly to a fresh 15-month low of $0.6570.
For the week so far, the dollar has gained nearly 1.7% on the euro almost 2% on the Antipodeans; the U.S. dollar index has shot above 97 for the first time after July 2020.
Sterling was pushed to a one-month low of $1.3385 on Thursday but has jumped back to $1.3409 as traders await the Bank of England’s meeting next week. Rates markets have priced a 90% chance of an increase.
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