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 firmed slightly against most major currencies
in Asia trade, sending sterling 0.06% lower to $1.2035.
Against the Japanese yen , the dollar stood near a
roughly two-month high at 134.11.
The Aussie rose 0.17% to $0.6890, having fallen
close to 0.6% last week.
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 and higher producer prices, have raised
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.
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 interest rates would 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 down 0.08% at $1.06855.
"The hawkish ECB comments aren't likely to support euro,
given the dollar strength," said Kong.
Elsewhere, the U.S. dollar index slipped 0.05% to
103.93, though is up nearly 2% for the month so far, keeping it
on track for its first monthly gain since last September.
The kiwi fell 0.07% to $0.6238, 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, China on Monday kept its benchmark lending rates
unchanged for a sixth straight month in February, as expected,
with the world's second-largest economy showing more signs of
recovery from a pandemic-induced slump.
The offshore yuan was last marginally lower at
6.8741 per dollar, while the onshore yuan last bought
6.8657 per dollar.
"We continue to expect that the People's Bank of China will
cut 1 and 5-year loan prime rates by 20bps each this year," said
analysts at Maybank.
"This will help frontload credit support to give additional
impetus to the early stages of economic recovery."
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(Reporting by Rae Wee
Editing by Shri Navaratnam and Sam Holmes)
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