By Rae Wee
SINGAPORE, April 17 (Reuters) - The dollar bounced from
a one-year low on Monday as resilience in core U.S. retail
sales, a rise in short-term inflation expectations and
impressive Wall Street bank earnings raised market expectations
for an interest rate hike in May.
While U.S. retail sales fell more than expected in March,
so-called core retail sales, which excludes automobiles,
gasoline, building materials and food services, slipped just
0.3% last month, data released on Friday showed.
Adding to the mix of resilient U.S. economic data was a
strong run of first-quarter 2023 earnings from JPMorgan Chase &
Co , Citigroup Inc and Wells Fargo & Co ,
brushing off concerns about a banking crisis that unfolded in
March.
Against a basket of currencies, the U.S. dollar index rose 0.15% to 101.82, standing some distance away from Friday's
one-year low of 100.78.
Friday marked the fifth straight weekly loss for the index.
The euro fell 0.2% to $1.0965, while sterling slipped 0.22% to $1.2387.
"The U.S. bank earnings came out much better than
expectations, which suggests that the U.S. economy is not so bad
... So I think that will increase (expectations) for the Fed to
continue raising interest rates," said Tina Teng, market analyst
at CMC Markets.
Money markets are now pricing in a roughly 81% chance that
the Federal Reserve will raise interest rates by 25 basis points
next month, up from about a 69% chance last week. Short-term inflation expectations have also increased, with
the University of Michigan's preliminary April reading showing
that one-year inflation expectations rose to 4.6% from 3.6% in
March.
Yields on U.S. Treasuries jumped in the wake of the data
releases on Friday, and remained elevated on Monday.
The two-year U.S. Treasury yield , which typically
moves in step with interest rate expectations, stood at 4.1137%,
after hitting a roughly two-week top of 4.137% on Friday.
The benchmark 10-year yield was last at 3.5261%.
Some hawkish Fed speak also aided the higher interest rate
expectations, with Fed Governor Christopher Waller and Atlanta
Fed President Raphael Bostic suggesting that the Fed could hike
another 25 bps next month.
In other currencies, the dollar rose 0.16% against the
Japanese yen to 133.96, as the Bank of Japan remains a
dovish outlier as it continues to keep interest rates ultra-low.
The Aussie slipped 0.19% to $0.6696, while the kiwi fell 0.39% to $0.6186.
Over in Asia, a raft of economic data from China out this
week takes centre stage, as traders look for clues on how the
recovery in the world's second-largest economy is playing out.
"We expect March activity data to show moderate growth
momentum acceleration, but (are) unlikely to see large positive
surprises," analysts at MUFG said.
Last week, China reported an unexpected surge in its exports
in March, which shot up 14.8% from a year earlier, snapping five
straight months of declines.
The offshore yuan fell more than 0.1% to 6.8807 per
dollar.
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(Reporting by Rae Wee; Editing by Jacqueline Wong)
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