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Dollar rises to six-week peak as strong U.S. retail sales bolster higher-rates scenario



Dollar rises to six-week peak as strong U.S. retail sales bolster higher-rates scenario
© Reuters. FILE PHOTO: Woman holds U.S. dollar banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(This Feb. 15 story has been refiled to mention the full title of analyst as the head of FX risk advisory at Silicon Valley Bank in paragraph 5)

By Gertrude Chavez-Dreyfuss and Laura Matthews

NEW YORK (Reuters) – The dollar climbed to a six-week peak against a currency basket after the release of hotter-than-expected U.S. retail sales data on Wednesday, bolstering investors’ expectations that the Federal Reserve would keep monetary policy tight for some time to fight stubbornly high inflation.

The greenback also ascended to a fresh six-week peak versus the yen.

Data showed that U.S. retail sales surged 3.0% last month, increasing by the most in nearly two years. The numbers for December were unrevised to show sales dropping 1.1%. Economists polled by Reuters had forecast sales would increase 1.8%, with estimates ranging from 0.5% to 3.0%.

On Tuesday, the U.S. government reported that consumer prices accelerated on a monthly basis in January, rising 0.5%, due in part to higher rental and food costs. The gain matched economists’ expectations in a Reuters poll and was well above the 0.1% month-on-month rise in December. Year-on-year prices rose 6.4%, down from 6.5% in December but above economists’ expectations of a 6.2% gain.

“What all this has done, is it’s pushed that terminal rate, just 25 basis points higher than in January. So, now, the terminal rate has been pushed to about 5.25,” said Ivan Asensio, head of FX risk avisory at Silicon Valley Bank in San Francisco, referring to the U.S. central bank’s benchmark overnight interest rate.

“It’s not just that we have renewed expectations for now 25 (basis points higher) in March and then 25 as expected in May, but also the possibility that rates have to stay higher for longer. So, where is the plateau? Every day that goes by, the 2% (inflation) target for the Fed seems a bit far into the distance,” he added.

In afternoon trading, the rose 0.6% to 103.90, after hitting a six-week peak of 104.11.

Against the yen, the dollar surged to 134.355 yen, the highest since Jan. 6. It was last up 0.8% at 134.16 yen.

The currency pair’s consolidation around 127 has extended, wrote Shaun Osborne, chief FX strategist, at Scotiabank, and the technical picture for the U.S. dollar has developed more positively through February so far.”

He added that U.S. dollar gains above the 133.10 yen zone suggest additional, corrective gains to the 136.50/137 area will follow.

The euro, meanwhile, fell 0.5% against the dollar to 1.0682.

In December, Fed policymakers’ median projection saw the central bank’s policy rate peaking at 5.1% this year. But interest rate futures markets have priced a peak above 5.2% hitting in July, and traders are becoming less sure that cuts are coming in 2023. Rates currently stand at 4.5% to 4.75%.

Deutsche Bank (ETR:) economists said they now expect the Fed to raise the policy rate to as high as 5.6%, having previously expected a 5.1% peak.

Sterling dropped 1.3% to $1.2022 in the wake of data showing British inflation cooled more than expected in January to an annual rate of 10.1%, alleviating some of the pressure on the Bank of England to keep hiking interest rates.

Also on investors’ radars was an announcement by Scottish First Minister Nicola Sturgeon that she would step down after more than eight years in the job.

The Australian dollar fell 1.3% to US$0.6897. Australia’s central bank chief Philip Lowe told members of parliament that rates still had a ways to rise.

Meanwhile, traded onshore hit more than a one-month low at 6.8576 to the dollar, which was last up 0.3% at 6.8515.


Currency bid prices at 3:36PM (2036 GMT)

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

Previous Change


Dollar index 103.9000 103.2500 +0.64% 0.396% +104.1100 +103.1500

Euro/Dollar $1.0682 $1.0737 -0.50% -0.30% +$1.0745 +$1.0661

Dollar/Yen 134.1750 133.1000 +0.82% +2.35% +134.3550 +132.5500

Euro/Yen 143.31 142.89 +0.29% +2.15% +143.4300 +142.3500

Dollar/Swiss 0.9244 0.9215 +0.33% -0.01% +0.9262 +0.9214

Sterling/Dollar $1.2018 $1.2176 -1.29% -0.61% +$1.2181 +$1.1990

Dollar/Canadian 1.3398 1.3338 +0.45% -1.11% +1.3440 +1.3336

Aussie/Dollar $0.6898 $0.6985 -1.25% +1.20% +$0.6989 +$0.6865

Euro/Swiss 0.9872 0.9893 -0.21% -0.23% +0.9911 +0.9865

Euro/Sterling 0.8885 0.8820 +0.74% +0.46% +0.8902 +0.8817

NZ $0.6279 $0.6338 -0.96% -1.14% +$0.6338 +$0.6253


Dollar/Norway 10.2115 10.1295 +0.88% +4.13% +10.2435 +10.1585

Euro/Norway 10.9111 10.8768 +0.32% +3.98% +10.9618 +10.8589

Dollar/Sweden 10.4384 10.3516 +0.32% +0.30% +10.4678 +10.3521

Euro/Sweden 11.1521 11.1165 +0.32% +0.02% +11.1855 +11.1137

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Forex News

Dollar retreats, euro gains after Credit Suisse boosts risk sentiment




The U.S. dollar retreated in early European trade Thursday and the euro pushed higher as Credit Suisse’s move to bolster its financial position boosted risk sentiment.

At 03:55 ET (07:55 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.3% lower at 103.980, handing back some of the previous session’s 1% gain.

Credit Suisse (SIX:) announced late Wednesday to borrow as much as CHF 50 billion ($1 = CHF 0.9297) from the Swiss National Bank, strengthening its liquidity position.

Worries have been growing about the Swiss lender’s financial health for some time as it struggled with hefty customer outflows in the wake of a string of scandals. These came to head on Wednesday with its share price slumping to a record low as its main investor, Saudi National Bank, said it was unable to provide more funding to the lender.

The news of this credit line has boosted sentiment, soothing some concerns over an immediate collapse in the sector that had been hit hard by the three recent U.S. bank failures.

rose 0.4% to 1.0619, bouncing on the news, ahead of the European Central Bank’s latest policy-setting later in the session.

The ECB had previously signaled the likelihood of another interest rate increase of 50 basis points as underlying Eurozone remained elevated, but concerns about potential repercussions to the banking sector from such a hefty hike could prompt the policy makers to act more cautiously.

“The market will … take its cue from the European Central Bank today. Pushing on with a 50bp rate hike will prove difficult and we should expect more volatility immediately after the … decision,” said analysts at ING, in a note.

ECB President Christine Lagarde’s will also be of interest as she is sure to be asked how the central bank can balance efforts to deliver price stability while safeguarding financial stability.

The question is the same in the U.S., with the likely to hold back from increasing interest rates by an outsized 50 basis points next week, given the strain on the U.S. banking system.

Goldman Sachs has lifted its estimate of the odds of a U.S. recession to 35% over the next 12 months in response to increased uncertainty over the economic impact of bank stress, an increase from 25% previously.

Elsewhere, rose 0.3% to 1.2105, boosted by the improved risk sentiment. Also helping was Chancellor Jeremy Hunt’s comments in the budget on Wednesday that the economy was likely to shrink 0.2% in 2023, an improvement from the previous forecast for a 1.4% contraction.

fell 0.5% to 132.69, with the yen one of the best performers of the day. The risk-sensitive rose 0.6% to 0.665670, while edged 0.1% lower to 6.9007.

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China wants weaker US dollar as reserve currency, says Biden economist nominee




China wants weaker US dollar as reserve currency, says Biden economist nominee
© Reuters. Dr. Jared Bernstein testifies on his nomination to be Chairman of the Council of Economic Advisers during a Senate Banking, Housing and Urban Affairs Committee hearing on Capitol Hill in Washington, U.S., April 18, 2023. REUTERS/Amanda Andrade-Rhoades

WASHINGTON (Reuters) – There was “some evidence” that China wants the dollar to weaken as the international reserve currency, said a White House nominee for a top economist position on Tuesday, and he urged Congress to raise the U.S. debt ceiling to protect the dollar’s value.

Jared Bernstein, a member of the White House Council of Economic Advisers, told a Senate Banking Committee hearing on his nomination to head the body that U.S. control of the world’s reserve currency offered a number of benefits, including the ability to impose sanctions, as Washington had done on Russia over its war against Ukraine.

Asked about an essay he published in the New York Times in 2014 entitled “Dethrone King Dollar” and whether the U.S. would be better off if it were to lose that status, Bernstein told the committee, “Definitely not.”

Bernstein, who wrote the piece while serving as a senior fellow at the Center on Budget and Policy Priorities, said the essay was intended to show both the “very solid benefit” of having the world’s reserve currency, but also the costs, including the ability of China and other countries to manage their currencies to have a trade advantage.

Asked by Republican Senator Bill Haggerty where he stood now, Bernstein said, “I share your view on the importance of the dollar as the dominant reserve currency.”

Bernstein used the exchange to underscore the administration’s concerns about the looming deadline this June for Congress to raise the debt ceiling or risk default, and Republican efforts to condition that approval on budget cuts.

He said raising the debt ceiling would help maintain the dollar’s reserve currency status and protect its value. “Having that kind of kind of default out there as a political tool is antithetical to what you and I are talking about right now.”

While Bernstein did not elaborate on China, the U.S. Treasury in November found no major U.S. trading partners manipulated its exchange rates to gain unfair advantage through June 2022, but would monitor China and six other countries.

The Treasury report criticized China for not publishing foreign exchange intervention and lack of transparency around its exchange-rate mechanism. China has previously denied intervening to weaken the yuan.

Weak tax collections in April could mean the U.S. government’s deadline to raise the $31.4 trillion debt ceiling will happen sooner than expected, analysts said on Tuesday.

The Treasury Department has warned that the federal government might no longer be able to meet its financial obligations as early as June 5, while the nonpartisan Congressional Budget Office has forecast that moment would come between July and September.

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Fed’s Bowman sees potential for interbank digital dollar




Fed's Bowman sees potential for interbank digital dollar
© Reuters. FILE PHOTO: U.S. Federal Reserve Governor Michelle Bowman gives her first public remarks as a Fed policymaker at an American Bankers Association conference in San Diego, California, U.S., February 11 2019. REUTERS/Ann Saphir

(Reuters) – A so-called “wholesale” central bank digital currency could hold promise for the future settlement of certain financial market transactions and processing international payments, Federal Reserve Governor Michelle Bowman said on Tuesday.

While a digital dollar could make sense for interbank transactions, there could be unintended consequences like disruptions to the banking system if the Fed were to design a central bank digital currency that would be directly available to the public, Bowman said in prepared remarks for an event at Georgetown University’s Psaros Center for Financial Markets and Policy.

The U.S. central bank has not yet said if it would embark on an effort to create a central bank digital currency, and has previously said it would seek authorization from Congress and the executive branch before doing so.

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