By Rae Wee
SINGAPORE, Feb 20 (Reuters) - The dollar was on the
front foot on Monday, supported by a strong run of economic data
out of the United States that traders bet will keep the Federal
Reserve on its monetary policy tightening path for longer than
initially expected.
The greenback advanced broadly in early Asia trade, sending
sterling 0.12% lower to $1.2028 and the Aussie falling 0.18% to $0.6866.
Against the Japanese yen , the dollar rose 0.14% to
134.32.
Trading is likely to be thin on Monday, with U.S. markets
closed for Presidents' Day.
A slew of data out of the world's largest economy in recent
weeks pointing to a still-tight labour market, sticky inflation,
robust retail sales growth and higher monthly producer prices,
have raised market expectations that the U.S. central bank has
more to do in taming inflation, and that interest rates would
have to go higher.
"For the week ahead, the dollar can track higher given the
recent run of economic data which supports the narrative of
higher-for-longer interest rates," said Carol Kong, a currency
strategist at Commonwealth Bank of Australia (CBA).
Markets are now expecting the Fed funds rate to peak just
under 5.3% by July. Hawkish comments from Fed officials have also underpinned
the U.S. dollar, as they signalled that interest rates will need
to go higher in order to successfully quash inflation.
Similarly, two European Central Bank (ECB) policymakers said
on Friday that interest rates in the euro zone still have some
way to rise, pushing up market pricing for the peak ECB rate. That, however, did little to lift the euro , which
was last 0.16% lower at $1.0677.
"The hawkish ECB comments aren't likely to support euro,
given the dollar strength," said Kong.
Elsewhere, the U.S. dollar index rose 0.05% to
104.03, and is up nearly 2% for the month so far, keeping it on
track for its first monthly gain since last September.
The kiwi slipped 0.17% to $0.6232, with eyes on the
Reserve Bank of New Zealand's (RBNZ) interest rate decision on
Wednesday.
The RBNZ is expected to scale down its tightening campaign
only slightly, with a half-point interest rate hike to 4.75%.
"With inflation so high ... not staying the course could
mean even higher interest rates are required down the track,"
said analysts at ANZ.
In Asia, focus is on China's loan prime rate decision on
Monday, with markets widely expecting its benchmark lending
rates to be kept unchanged at the monthly fixing.
"We don't think there will be any changes made," said CBA's
Kong. "Our view has been that the (Chinese) government should
announce more easing measures to aid the Chinese recovery."
The offshore yuan was last marginally lower at
6.8783 per dollar.
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(Reporting by Rae Wee
Editing by Shri Navaratnam)
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