Dollar soars to six-week high on hawkish Fedspeak By Investing.com

By Peter Nurse

Investing.com – The U.S. dollar surged to a six-week high in early European trade Friday, after strong U.S. economic data and hawkish comments from Federal Reserve policymakers pointed to more interest rate hikes. 

At 02:00 ET (07:00 GMT), the , which tracks the greenback against a basket of six other currencies, traded 0.5% higher at 104.345, on track for a third consecutive week of gains.

Data released Thursday pointed to a resilient U.S. economy, as the number of Americans filing for declined unexpectedly last week, while accelerated in January.

This followed on from rebounding sharply in January after two straight monthly declines and coming in stronger than expected earlier in the week.

“The data provides ammunition for the Fed to remain in hawkish mode and for the market to continue to price two to three more 25bp Fed rate hikes by the summer,” said analysts at ING, in a note.

The apparent strength of the U.S. economy has seemingly provided room for the Federal Reserve to continue its campaign against inflation with more aggressive interest .

Federal Reserve Bank of Cleveland President said she had seen a “compelling economic case” for rolling out another 50 basis-point hike, and St. Louis President said he would not rule out supporting such an increase in March, rather than a quarter point.

Bullard added that a Fed policy rate in the range of 5.25% to 5.5% would be adequate to cool the pace of price increases – above the 5% to 5.25% rate suggested by the Fed policymakers as of December.

This hawkish stance has pushed benchmark Treasury yields to their highest levels since late December.

Elsewhere, fell 0.3% to 1.0633, feeling the impact of the surging dollar, trading at its lowest since Jan. 9.

European Central Bank Chief Economist took something of a dovish stance on Thursday, saying that much of the impact on inflation of the recent increases in borrowing costs is yet to be felt.

fell 0.4% to 1.1941, falling to a six-week low, after U.K. rose 0.5% on the month in January, stronger than the expected drop of 0.3%.

rose 0.6% to 134.74, climbing to its highest level since late December, with the yen pressured by the rise in U.S. yields.

There remains a great deal of uncertainty over the path of monetary policy under new Bank of Japan Governor Kazuo Ueda, who is due to be confirmed in the post next week.

Ueda faces the daunting task of steering the Japanese economy through rising inflation and weakening economic growth. 

The risk-sensitive fell 0.5% to 0.6842, near a one-month low, while rose 0.2% to 6.8765, despite China’s top leaders declaring a “decisive victory” over COVID-19.