LONDON, Feb 20 (Reuters) – The greenback edged decrease on Monday however saved near Friday’s six-week excessive, after a flurry of financial information strengthened market expectations of tighter financial coverage from the Federal Reserve.
The U.S. greenback index , which measures the greenback towards six different main currencies, slipped 0.1% to 103.91. It’s nonetheless up virtually 1.8% for the month, holding it on monitor for its first month-to-month acquire since final September. It hit a six-week excessive of 104.67 on Friday.
Liquidity is predicted to be skinny on Monday, with U.S. markets closed for Presidents’ Day.
Knowledge from the world’s largest financial system in current weeks has pointed to a still-tight labour market, sticky shopper costs, strong retail gross sales and better producer costs, elevating expectations the U.S. central financial institution had extra to do to tame inflation, and that rates of interest would rise.
However with markets anticipating the Fed funds charge to peak slightly below 5.3% by July, analysts mentioned the transfer within the greenback might have run its course.
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“The greenback has had fairly a giant transfer this month on the again of charges repricing and the query is how a lot additional that is going to run,” Chris Turner, international head of markets at ING mentioned.
“I might say nearly all of what we’re calling a ‘corrective rally’ within the greenback has been seen,” Turner added.
Hawkish feedback from Fed officers have additionally underpinned the U.S. greenback, as they signalled rates of interest would want to rise to quash inflation.
Sweden’s crown outperformed after core inflation ticked up in January, whereas minutes from the central financial institution’s final assembly confirmed policymakers backed extra charge hikes to carry inflation beneath management.
The euro fell 1.1% towards the Swedish crown to 11.059 crowns whereas the greenback was down 0.8% to 10.3604.
“We now see the Riksbank mountain climbing by 50 foundation factors in April and 25 foundation factors in June,” mentioned Torbjörn Isaksson, chief analyst at Nordea, who beforehand noticed yet another 25 foundation level rise in April.
“This could help the crown and we’re seeing it stronger as we speak,” Isaksson added, whereas noting the European Central Financial institution (ECB) and Fed have additionally sounded hawkish.
Two ECB policymakers mentioned on Friday that rates of interest within the euro zone have some strategy to rise, pushing up market pricing for the height ECB charge.
The euro was little modified towards the greenback at $1.0687, simply above Friday’s six-week low of $1.06125.
“We expect the U.S. disinflation course of could have one other leg within the second quarter, whereas in Europe, inflation is more likely to be stickier,” ING’s Turner mentioned.
“Euro charges are most likely more likely to keep at greater ranges, whereas we expect greenback charges will extra simply flip decrease,” Turner added, which he mentioned may help the euro within the first half of the 12 months.
The greenback was down 0.1% towards the yen to 134 . It hit a two-month excessive of 135.12 yen on Friday.
The Australian greenback rose 0.4% to $0.6909 forward of the minutes from the Reserve Financial institution of Australia’s newest coverage assembly on Tuesday.
The kiwi rose 0.1% to $0.6249, forward of a Reserve Financial institution of New Zealand (RBNZ) charge resolution on Wednesday, the place they’re anticipated to scale all the way down to a half-point rate of interest improve.
Reporting by Samuel Indyk and Rae Wee
Modifying by Shri Navaratnam, Sam Holmes and Barbara Lewis
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