# U.S. dollar advances vs major currencies as risk appetite fades
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-19
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dollar rises as safe-haven bids increase amid hawkish Fed
Meta Description: Follow the dollar's fluctuating journey as it gains safe-haven status, while analysts predict a descent due to Fed policy and subdued US inflation outlook.
URL: https://financedigest.com/u-s-dollar-advances-vs-major-currencies-as-risk-appetite-fadeshtml

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By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The dollar rose against major currencies on Wednesday in choppy trading, gaining safe-haven bids as risk appetite worsened with stocks on the defensive amid hawkish comments from U.S. Federal [Reserve officials that suggested more interest rate increases are likely to tame inflation](https://www.financedigest.com/oil-prices-dip-on-u-s-crude-reserve-release-inflation-pressure.html "Oil prices dip on U.S. crude reserve release, inflation pressure").

Analysts, however, remained convinced that the currency has already [hit its peak](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") and is in the midst of an overall downtrend.

The [dollar will continue to sputter due to the tamer outlook](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles") for both U.S. [inflation and Fed](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") policy,” said Joe Manimbo, senior market analyst, at Convera in Washington.

The [dollar is likely to remain on a descending path](https://www.financedigest.com/dollar-tentative-as-investors-assess-rate-hike-path.html "Dollar tentative as investors assess rate-hike path") as long as markets price in a material risk of U.S. rate [cuts later this year.”](https://www.financedigest.com/inpost-sees-better-margin-in-poland-plans-no-job-cuts-this-year.html "InPost sees better margin in Poland, plans no job cuts this year")

The greenback earlier fell across board after a slate of weak [economic data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") backed expectations that the Fed may be nearing a pause in its rate-hiking cycle.

The earlier sell-off in the [dollar came after the Bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") of Japan maintained ultra-low interest rates. The [yen initially gained](https://www.financedigest.com/yen-trims-gains-as-possible-next-boj-governor-says-current-policy-appropriate.html "Yen trims gains as possible next BOJ governor says current policy appropriate") sharply, but recovered on expectations for tighter policy in the coming months.

Fed officials on Wednesday, however, dampened expectations that the U.S. central bank is [nearing the end](https://www.financedigest.com/exclusive-nissan-seeks-tech-tie-up-without-renault-as-alliance-nears-end-of-road.html "Exclusive-Nissan seeks tech tie-up without Renault as alliance nears end of road") of its tightening policy.

Cleveland [Fed President Loretta Mester said the Fed needs to raise interest rates](https://www.financedigest.com/wage-data-dents-dollar-recovery-before-fed-rate-decision.html "Wage data dents dollar recovery before Fed rate decision") a “little bit” above the 5.00% to 5.25% range in order to bring inflation to heel.

St. Louis [Fed President James Bullard, for his part, said the Fed should get the policy rate of interest above 5% “as quickly as we can” before pausing](https://www.financedigest.com/dollar-pauses-for-breath-as-fed-swings-into-focus.html "Dollar pauses for breath as Fed swings into focus") rate increases needed to battle an ongoing outbreak of inflation.

Their [comments helped push](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") U.S. [stocks lower and extended a rally in Treasuries that weighed on yields](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling").

In afternoon trading, the U.S. currency rose against the commodity-linked currencies such as the Australian, New Zealand, and Canadian dollars, which sensitive to [risk appetite](https://www.financedigest.com/stocks-rise-after-bank-sale-fuels-investor-risk-appetite.html "Stocks rise after bank sale fuels investor risk appetite").

The [Australian dollar](https://www.financedigest.com/asian-stocks-make-7-month-highs-australian-dollar-gains-on-hot-inflation.html "Asian stocks make 7-month highs, Australian dollar gains on hot inflation") fell 0.7% to US$0.6936, after hitting its highest since August last year. The New Zealand dollar [traded flat on the day](https://www.financedigest.com/stocks-fall-treasury-yields-rise-upon-final-2022-trading-day.html "Stocks fall, Treasury yields rise upon final 2022 trading day") at US$0.6430. Earlier in the session, it rose to its highest level in a month.

Against the Canadian dollar, the buck rose 0.8% to C$1.3497.

The U.S. unit earlier dropped after data showed that U.S. [retail sales](https://www.financedigest.com/uk-retailers-turn-positive-on-sales-hopes-after-bleak-winter.html "UK retailers turn positive on sales hopes after bleak winter") fell more than expected in December, pulled down by declines in purchases of motor vehicles and a range of other goods. They fell 1.1% last month. Data for [November was revised to show sales dropping 1.0% instead of 0.6%](https://www.financedigest.com/spains-november-retail-sales-fall-0-6-on-year.html "Spain’s November retail sales fall 0.6% on year") as previously reported.

A separate report from the Labor Department showed the producer [price index for final demand decreased 0.5% in December after rising](https://www.financedigest.com/oil-prices-rise-on-u-s-drawdown-chinese-fears-weigh.html "Oil prices rise on U.S. drawdown, Chinese fears weigh") 0.2% in November. The PPI report followed data last week showing that monthly [consumer prices](https://www.financedigest.com/analysis-to-raise-prices-or-not-consumer-goods-makers-weigh-bets-on-buyer-strength.html "Analysis-To raise prices or not? Consumer goods makers weigh bets on buyer strength") fell for the first time in more than 2-1/2 years in December.

The PPI and [retail sales](https://www.financedigest.com/valentines-day-spending-boosts-british-retail-sales-in-february-brc.html "Valentine’s Day spending boosts British retail sales in February – BRC") numbers show that there are disinflationary pressures going on,” said Juan Perez, director of trading at Monex USA in Washington.

U.S. [manufacturing output](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI") also fell 1.3% in December, more than expected, data showed.

In Japan, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term [interest rates](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") and around 0% for the 10-year yield, by a unanimous vote. It also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target.

Some analysts said the [BOJ was likely to tighten policy](https://www.financedigest.com/yen-retreats-after-boj-policy-tweak-sparked-surge.html "Yen retreats after BOJ policy tweak sparked surge") soon and the currency walked back some of its losses.

The [dollar rose as much as 2.7% to 131.58 yen before gains](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") were pared. It was last up 0.6% at 128.825 yen.

Sterling rose to a five-week high even as consumer price inflation fell to a three-month [low as core CPI](https://www.financedigest.com/euro-rises-after-spanish-cpi-dollar-slips-towards-8-mth-low.html "Euro rises after Spanish CPI, dollar slips towards 8-mth low") failed to moderate, remaining at 6.3%. The pound was last up 0.4% at $1.2336.

The [euro was little](https://www.financedigest.com/big-fall-in-euro-zone-inflation-offers-little-help-for-ecb.html "Big fall in euro zone inflation offers little help for ECB") changed $1.0790. It earlier posted sharp [gains after European](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook") Central Bank member Francois Villeroy de Galhau said it was too early to speculate about what the central bank would do at the March meeting. Media reports on Tuesday said the ECB could [slow its pace of tightening further in March](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows").

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Currency bid prices at 3:59PM (2059 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 102.4000 102.4000 +0.02% -1.053% +102.9000 +101.5100

Euro/Dollar $1.0791 $1.0790 +0.00% +0.70% +$1.0888 +$1.0767

Dollar/Yen 128.8550 128.1200 +0.58% -1.71% +131.5700 +127.5700

Euro/Yen 139.03 138.22 +0.59% -0.91% +141.6800 +138.2700

Dollar/Swiss 0.9168 0.9218 -0.55% -0.85% +0.9245 +0.9086

Sterling/Dollar $1.2339 $1.2287 +0.43% +2.03% +$1.2435 +$1.2254

Dollar/Canadian 1.3498 1.3391 +0.81% -0.37% +1.3500 +1.3351

Aussie/Dollar $0.6937 $0.6986 -0.70% +1.77% +$0.7064 +$0.6936

Euro/Swiss 0.9891 0.9946 -0.55% -0.04% +0.9963 +0.9876

Euro/Sterling 0.8743 0.8778 -0.40% -1.14% +0.8804 +0.8735

NZ $0.6430 $0.6430 +0.02% +1.28% +$0.6530 +$0.6424

Dollar/Dollar

Dollar/Norway 9.9185 9.8795 +0.43% +1.10% +9.9370 +9.7805

Euro/Norway 10.7070 10.6436 +0.60% +2.03% +10.7250 +10.6031

Dollar/Sweden 10.3379 10.4167 -0.74% -0.67% +10.4549 +10.2408

Euro/Sweden 11.1495 11.2329 -0.74% +0.00% +11.2508 +11.1020

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Samuel Indyk in London and Ankur Banerjee in Singapore; Editing by Marguerita Choy and Deepa Babington)


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