The US dollar on Friday consolidated gains and posted its biggest weekly rise in seven months as markets priced in a year ahead of aggressive hikes in US interest rates.
Money markets priced in a 28.5 basis-point interest rate hike in March last year and as many as 119.5 basis points in cumulative increases by year’s end as the US dollar steadily rose in a week highlighted by a more hawkish tone from the US Federal Reserve.
The US dollar index rose a scant 0.04 percent to 97.22. The index, which measures the US dollar’s value against other major currencies, rose 1.65 percent for the week, its biggest weekly gain since June. It shot above 97 for the first time since July 2020.
Photo: Reuters
“I look for some consolidation, but nothing to say that the dollar’s up move is over,” Bannockburn Global Forex chief market strategist Marc Chandler said.
US labor costs increased in the fourth quarter, but less than expected, the US Department of Labor said.
The Employment Cost Index (ECI), the broadest measure of labor costs, rose 1.0 percent after increasing 1.3 percent a quarter earlier.
Economists polled by Reuters had forecast a 1.2 percent advance in the ECI, widely viewed as one of the better measures of labor market slack and a predictor of core inflation.
“The Employment Cost Index, which [Fed Chairman Jerome] Powell has referred to specifically, was a bit softer than expected, and has spurred some position adjusting ahead of the weekend,” Chandler said.
US Treasury yields eased, with 10-year yields falling to about 1.77 percent for the day, well below two-year highs of nearly 1.9 percent hit on Monday.
The two-year Treasury yield, which often moves in step with rate expectations, slid 2.8 basis points to 1.164 percent, but was still much higher for the week.
Major currencies drifted sideways in Asian trading before Lunar New Year holidays next week even though US yields were marginally higher.
The New Taiwan dollar declined against US dollar on Friday, losing NT$0.022 to close at NT$27.828, down 0.45 percent from NT$27.702 a week earlier.
However, the NT dollar soared 2.02 percent against the greenback in the Year of the Ox due to Taiwan’s robust export performance, the central bank said.
Friday was the last trading session for the year on the lunar calendar.
The euro nursed losses on Friday with the single currency little changed at US$1.1143, a bit up from Thursday’s 20-month low of US$1.1131.
The yen rose 0.14 percent to ￥115.21 per US dollar.
Additional reporting by CNA, with staff writer
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