Dollar advances as traders consider higher-for-longer rates view


SINGAPORE : The dollar was on the front foot on Monday, hovering near a seven-week peak after a slew of strong U.S. economic data reinforced the view that the Federal Reserve will have to raise interest rates further and for longer.

The dollar index, which measures the U.S. currency against six major peers, was at 105.17, just below the seven week peak of 105.32 it touched on Friday after hotter-than-expected data.
The index is up 3 per cent for February and set to snap a four-month losing streak.

The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, shot up 0.6 per cent last month after gaining 0.2 per cent in December, according to data on Friday.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.8 per cent last month, according to the Commerce Department.
Economists polled by Reuters had forecast consumer spending rebounding 1.3 per cent.

Rodrigo Catril, senior currency strategist at National Australia Bank, said the data depicted a U.S economy running too hot at the start of the year, increasing the urgency for the Fed to tighten further over coming months.

“The reality is that the U.S economy has started 2023 from a stronger position than many of us had expected.”
The market is now pricing U.S. interest rates to peak at 5.4 per cent in July and remain above 5 per cent through the end of the year.

Source: Reuters


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