FOREX-U.S. dollar gains as strong data signal higher rates

(Adds new comments; updates prices, changes dateline) By Laura Matthews and Harry Robertson NEW YORK/LONDON, Feb 22 (Reuters) - The dollar gained modestly on Wednesday against its peers as recent strong economic data eased recession fears but reinforced concerns that the Federal Reserve’s inflation-fighting interest rate hikes may stick around for longer. Survey data released on Tuesday showed U.S. business activity unexpectedly rebounded in February to reach its highest in eight months. St. Louis Fed President James Bullard said on Wednesday that the U.S. central bank needs to get inflation on to a sustainable path down toward its 2% goal this year or risk a repeat of the 1970s, when interest rates had to be repeatedly ratcheted up. He is the latest Fed official to signal that higher interest rates is likely needed to bring inflation back to desired levels. "The USD along with assets market is reacting to the realization of investors that it may have been hasty to overlook the Fed's hawkish guidance at the start of this year," said Jane Foley, head of FX strategy at Rabobank in London. "Stronger-than-expected U.S. data releases since the start of this month have reinforced the Fed's messages about stronger for longer interest rates."

Fed funds futures traders are now pricing the fed funds rate to reach 5.35% in July, and remain above 5% all year. The Fed's target range stands at 4.5% to 4.75%, having risen rapidly from 0% to 0.25% in March 2022. The dollar index up 0.1% at 104.19, but off the high of 104.34 reached earlier in the day.

Sterling was down 0.2% at $1.2082, giving up much of yesterday's gains, while the euro fell 0.03% to 1.0644.

Investors' focus now turns to the release of the minutes from the Fed's latest meeting later on Wednesday, which could offer more insight into policymakers' plans. "We have maintained a hawkish outlook for the Fed and therefore had been expecting the USD to garner support into the middle of the year, though the move came a little sooner than we have been expecting. For a while our 3 month EUR/USD forecast has been 1.06," Foley said. A blockbuster U.S. employment report in early February sparked the rebound in the dollar, which has been helped along by a series of strong data releases. ======================================================== Currency bid prices at 10:39AM (1539 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change

Session
Dollar index 104.2300 104.1600 +0.09% 0.715% +104.3400 +104.0000 Euro/Dollar $1.0639 $1.0647 -0.08% -0.71% +$1.0663 +$1.0625 Dollar/Yen 134.6100 135.0150 -0.29% +2.68% +135.0550 +134.3750 Euro/Yen 143.23 143.77 -0.38% +2.09% +143.8800 +143.0700 Dollar/Swiss 0.9292 0.9280 +0.12% +0.48% +0.9293 +0.9255 Sterling/Dollar $1.2079 $1.2113 -0.27% -0.11% +$1.2135 +$1.2063 Dollar/Canadian 1.3554 1.3538 +0.12% +0.04% +1.3560 +1.3518 Aussie/Dollar $0.6811 $0.6856 -0.62% -0.04% +$0.6865 +$0.6811 Euro/Swiss 0.9885 0.9876 +0.09% -0.10% +0.9890 +0.9860 Euro/Sterling 0.8807 0.8786 +0.24% -0.42% +0.8822 +0.8785 NZ $0.6232 $0.6214 +0.31% -1.84% +$0.6251 +$0.6206 Dollar/Dollar
Dollar/Norway 10.3255 10.3100 -0.02% +5.03% +10.3385 +10.2845 Euro/Norway 10.9863 10.9748 +0.10% +4.71% +11.0032 +10.9587 Dollar/Sweden 10.3825 10.3819 -0.06% -0.24% +10.3893 +10.3254 Euro/Sweden 11.0469 11.0539 -0.06% -0.92% +11.0661 +11.0020 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Euro US non-farm payrolls ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Nick Zieminski)