# Dollar buoyant as robust U.S. data keep Fed hawks in control
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-20
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar Strengthens on Strong US Economic Data
Meta Description: Stay up-to-date with the latest on the dollar's rise, fueled by strong economic data from the United States. Find out more here.
URL: https://financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-controlhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-02-20t005617z1lynxmpej1j00trtroptp4global-forex-1736814434375-compressed.jpg)

By Rae Wee

SINGAPORE (Reuters) – The dollar was on the front foot on Monday, supported by a strong run of economic data out of the United States that traders bet will keep the Federal Reserve on its monetary policy tightening path for longer than initially expected.

The greenback advanced broadly in early Asia trade, sending sterling 0.12% lower to $1.2028 and the Aussie falling 0.18% to $0.6866.

Against the [Japanese yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor"), the dollar rose 0.14% to 134.32.

Trading is likely to be thin on Monday, with U.S. markets closed for [Presidents’ Day](https://www.financedigest.com/over-a-third-of-uk-people-think-thomas-whitmore-from-independence-day-will-be-joined-by-donald-trump-in-disneys-hall-of-presidents.html "Over a third of UK people think Thomas Whitmore from Independence Day will be joined by Donald Trump in Disney’s Hall of Presidents").

A slew of [data out of the world’s largest economy in recent weeks](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") pointing to a still-tight labour market, sticky inflation, robust retail sales growth and higher monthly producer prices, have raised market expectations that the U.S. central bank has more to do in taming inflation, and that interest [rates would have to go higher](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate").

For the week ahead, the dollar can [track higher given the recent run of economic data](https://www.financedigest.com/auditing-in-cyber-how-organisations-can-keep-track-of-their-data.html "AUDITING IN CYBER: HOW ORGANISATIONS CAN KEEP TRACK OF THEIR DATA") which supports the narrative of higher-for-longer interest rates,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).

[Markets are now expecting the Fed funds](https://www.financedigest.com/explainer-why-european-money-market-funds-inflows-are-lagging-behind-the-u-s-torrent.html "Explainer-Why European money market funds inflows are lagging behind the U.S. torrent?") rate to peak just under 5.3% by July.

Hawkish [comments from Fed](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") officials have also underpinned the U.S. dollar, as they signalled that interest [rates will need to go higher](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") in order to successfully quash inflation.

Similarly, two [European Central Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") (ECB) policymakers said on Friday that interest rates in the euro zone still have some way to rise, pushing up market pricing for the peak ECB rate.

That, however, did little to [lift the euro](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro"), which was last 0.16% lower at $1.0677.

The [hawkish ECB comments](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") aren’t likely to support euro, given the dollar strength,” said Kong.

Elsewhere, the U.S. dollar index rose 0.05% to 104.03, and is up nearly 2% for the month so far, [keeping it on track](https://www.financedigest.com/will-mays-new-minister-percy-keep-the-northern-powerhouse-on-track-post-brexit.html "WILL MAY’S NEW MINISTER PERCY KEEP THE NORTHERN POWERHOUSE ON TRACK POST BREXIT?") for its first monthly gain since last September.

The kiwi slipped 0.17% to $0.6232, with eyes on the Reserve Bank of New Zealand’s (RBNZ) interest [rate decision](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") on Wednesday.

The RBNZ is expected to scale down its tightening campaign only slightly, with a half-point interest [rate hike](https://www.financedigest.com/dollar-hits-one-month-high-against-yen-as-traders-bet-on-fed-rate-hike.html "Dollar hits one-month high against yen as traders bet on Fed rate hike") to 4.75%.

“With inflation so high … not staying the course could mean even [higher interest rates](https://www.financedigest.com/dollar-advances-as-strong-u-s-data-backs-higher-rates-backdrop.html "Dollar advances as strong U.S. data backs higher rates backdrop") are required down the track,” said analysts at ANZ.

In Asia, [focus is on China’s](https://www.financedigest.com/oil-rises-about-2-with-u-s-and-china-inflation-in-focus.html "Oil rises about 2% with U.S. and China inflation in focus") loan prime rate decision on Monday, with markets widely expecting its benchmark lending rates to be kept unchanged at the monthly fixing.

“We don’t think there will be any changes made,” said CBA’s Kong. Our view has been that the (Chinese) [government should announce more easing](https://www.financedigest.com/factbox-how-governments-are-trying-to-ease-inflation-pain.html "Factbox-How governments are trying to ease inflation pain") measures to aid the Chinese recovery.

The offshore [yuan was last marginally lower at 6.8783 per dollar](https://www.financedigest.com/dollar-slips-while-yuan-slumps-on-covid-unrest-in-china.html "Dollar slips, while yuan slumps on COVID unrest in China").

(Reporting by Rae Wee; Editing by Shri Navaratnam)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---