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Dollar posts biggest weekly rise in 7 months on rate bets

01/28/2022 | 04:19pm EDT
Saudi riyal, yuan, Turkish lira, pound, U.S. dollar, euro and Jordanian dinar banknotes are seen in this illustration

    By Herbert Lash
    NEW YORK, Jan 28 (Reuters) - The dollar consolidated gains
on Friday and posted its biggest weekly rise in seven months as
markets priced in a year ahead of aggressive hikes in U.S.
interest rates.
    Money markets priced in a 28.5-basis-point interest rate
hike in March and as many as 119.5 basis points in cumulative
increases by year's end as the dollar steadily rose in a week
highlighted by a more hawkish tone coming out of a Federal
Reserve meeting.
    The dollar index rose a scant 0.04%. The index, which
measures the dollar's value against other major currencies, rose
about 1.7% for the week to mark its biggest weekly gains since
June. It shot above 97 for the first time since July 2020.
    "I look for some consolidation, but nothing to say that the
dollar's up move is over," said Marc Chandler, chief market
strategist at Bannockburn Global Forex. 
    U.S. labor costs increased strongly in the fourth quarter,
but less than expected, the Labor Department said. The
Employment Cost Index (ECI), the broadest measure of labor
costs, rose 1.0% after increasing 1.3% in the prior quarter.

    Economists polled by Reuters had forecast a 1.2% advance in
the ECI, widely viewed as one of the better measures of labor
market slack and a predictor of core inflation.
    "The Employment Cost Index, which (Fed Chair Jerome) Powell
has referred to specifically, was a bit softer than expected and
has spurred some position adjusting ahead of the weekend,"
Chandler said.
    U.S. Treasury yields eased, with 10-year yields
falling to about 1.77% for the day, well below two-year highs of
nearly 1.9% hit on Monday.
    The two-year Treasury yield, which often moves in
step with rate expectations, slid 2.8 basis points to 1.164%,
but was still much higher for the week.
    The euro nursed losses on Friday with the single
currency little changed at $1.1143, a bit up from Thursday's
20-month low of $1.1131.
    Major currencies drifted sideways in Asian trading before
Lunar New Year holidays next week even though U.S. yields were
marginally higher. 
    Data has been supportive of the dollar as the U.S. economy
registered its best annual growth in nearly four decades.

    The greenback is poised to gain further versus the euro and
yen as the Fed raise rates but the European Central Bank and
Bank of Japan likely stand pat. BOJ Governor Haruhiko Kuroda
said Friday it was premature to raise the bank's rate targets.

    A preliminary estimate next week of euro zone consumer
prices in January is expected to lower the year-over-year rate
toward 4.3% from 5.0%, allowing ECB President Christine Lagarde
to keep the hawks at bay, Chandler said.
    The yen rose 0.14% to 115.21 per dollar, while the
Australian and New Zealand dollars languished, with the
kiwi dipping slightly to a fresh 15-month low of
    Sterling was pushed to a one-month low of $1.3360
on Thursday but has bounced back a bit as traders await the Bank
of England's meeting next week. Rates markets have priced a 90%
chance of a hike.

    Currency bid prices at 3:33PM (2033 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct       High Bid    Low Bid
                                              Previous                   Change                   
 Dollar index                 97.2440        97.2260     +0.04%         1.653%        +97.4410    +97.0540
 Euro/Dollar                  $1.1144        $1.1144     +0.00%         -1.97%        +$1.1174    +$1.1122
 Dollar/Yen                   115.1950       115.3650    -0.15%         +0.07%        +115.6800   +115.1250
 Euro/Yen                     128.36         128.55      -0.15%         -1.50%        +128.8500   +128.3600
 Dollar/Swiss                 0.9311         0.9310      +0.02%         +2.08%        +0.9329     +0.9291
 Sterling/Dollar              $1.3389        $1.3380     +0.04%         -1.02%        +$1.3433    +$1.3366
 Dollar/Canadian              1.2777         1.2740      +0.29%         +1.05%        +1.2796     +1.2713
 Aussie/Dollar                $0.6987        $0.7034     -0.68%         -3.89%        +$0.7046    +$0.6968
 Euro/Swiss                   1.0377         1.0375      +0.02%         +0.08%        +1.0391     +1.0360
 Euro/Sterling                0.8322         0.8323      -0.01%         -0.93%        +0.8334     +0.8306
 NZ                           $0.6537        $0.6582     -0.71%         -4.53%        +$0.6589    +$0.6532
 Dollar/Norway                8.9890         8.9605      +0.41%         +2.13%        +9.0210     +8.9375
 Euro/Norway                  10.0177        9.9641      +0.54%         +0.05%        +10.0840    +9.9557
 Dollar/Sweden                9.4500         9.3791      +0.67%         +4.79%        +9.4800     +9.3706
 Euro/Sweden                  10.5306        10.4609     +0.67%         +2.90%        +10.5548    +10.4511
 (Reporting by Saikat Chatterjee; Additional reporting by Tom
Westbrook in Sydney; Editing by Mark Heinrich and Jonathan

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.27% 0.66139 Delayed Quote.3.61%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) 0.07% 90.19 Delayed Quote.7.69%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.13% 0.7098 Delayed Quote.-2.18%
BRITISH POUND / EURO (GBP/EUR) -0.23% 1.17483 Delayed Quote.-1.79%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.13% 160.223 Delayed Quote.2.05%
BRITISH POUND / US DOLLAR (GBP/USD) 0.18% 1.2606 Delayed Quote.-7.30%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.03% 0.729778 Delayed Quote.4.34%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.32% 99.497 Delayed Quote.8.52%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.34% 0.7825 Delayed Quote.-1.41%
DOW JONES FXCM DOLLAR INDEX -0.14% 12640.87 Real-time Quote.4.07%
EURO / JAPANESE YEN (EUR/JPY) 0.35% 136.36 Delayed Quote.3.94%
EURO / US DOLLAR (EUR/USD) 0.41% 1.07295 Delayed Quote.-5.60%
INDIAN RUPEE / EURO (INR/EUR) -0.61% 0.011999 Delayed Quote.1.94%
INDIAN RUPEE / JAPANESE YEN (INR/JPY) -0.32% 1.636768 Delayed Quote.5.98%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.16% 0.012879 Delayed Quote.-3.88%
JAPANESE YEN / SWISS FRANC (JPY/CHF) -0.22% 0.7544 Delayed Quote.-4.37%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) -0.05% 82.342 Delayed Quote.3.76%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.02% 0.64799 Delayed Quote.-5.70%
US DOLLAR / EURO (USD/EUR) -0.39% 0.93201 Delayed Quote.5.94%
US DOLLAR / JAPANESE YEN (USD/JPY) -0.06% 127.08 Delayed Quote.10.13%
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