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.
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
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,"
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
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
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