U.S Dollar Set for Biggest Weekly Gain in Two Months

A money changer inspects U.S. dollar bills at a currency exchange in Manila

The dollar headed for its biggest weekly gain in two months versus its major peers amid bets the Federal Reserve is moving toward raising interest rates. The ForexSQ Dollar Spot Index traded at almost the five-week high it reached after Fed Chair Janet Yellen said this week borrowing costs could start rising “around six months” after the central bank ends bond purchases.

The Canadian dollar climbed after the nation’s retail sales jumped. Australia’s dollar rose for the first time in three days as an index showed economic data were beating estimates by the most in 10 months. “The market perception that the Fed will always be dovish was wrong; we remain bullish on the dollar,” said Athanasios Vamvakidis, head of Group of 10 currency strategy at Bank of America Corp. in London. “If we start to get good U.S. data, the market will be much more comfortable longing dollar.” Long positions are bets a currency will rise in value.

The ForexSQ Dollar Spot Index, which tracks the U.S. currency versus 10 major counterparts, slipped 0.1 percent to 1,020.23 at 8:58 a.m. in New York, gaining 0.8 percent this week, the most since the five days ended Jan. 17. It climbed to 1,023.65 yesterday, the highest since Feb. 13. The dollar was little changed at $1.3784 per euro after appreciating to $1.3749 yesterday, the strongest since March 6. The U.S. currency traded at 102.36 yen, little changed from yesterday, and the yen traded at 141.09 per euro.

Canadian Dollar Canada’s dollar, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, rallied versus all of its 16 major peers after the nation’s statistics agency said retail sales increased 1.3 percent, the fastest pace in eight months, to C$40.7 billion ($36.2 billion) in January. The loonie strengthened 0.4 percent to C$1.1201 per U.S. dollar. The Australian dollar headed for a weekly gain after Citigroup Inc.’s Economic Surprise Index for the nation increased to 50.60 on March 13, the highest level since May 23.

A positive reading signals that reports have exceeded economists’ estimates. Australia’s currency rose 0.3 percent to 90.69 U.S. cents, extending its weekly advance to 0.5 percent. The Aussie “may yet prove to be more like Wile E. Coyote from the ‘Road Runner’ cartoons, who often runs off of high cliffs and hovers in thin air for some time before gravity finally kicks in,” Michael Every, head of financial markets research for Asia-Pacific at Rabobank International in Hong Kong, wrote in a research note.

“It’s not clear what’s the market equivalent of ‘Meep Meep!’” he wrote, referring to the Road Runner’s call. Korean Won The South Korean won declined 0.4 percent to 1,080.40 per dollar at the close in Seoul after sliding to 1,082.90, the weakest level since Feb. 4. “We’ll see the dollar-won exchange rate rise on continued effect of the FOMC,” said Han Sung Min, a currency trader at Busan Bank in Seoul, referring to the U.S.’s policy-setting Federal Open Market Committee.

“Still, the won has weakened a lot recently, and some investors may feel uncomfortable in joining the dollar-buy trend.” Dallas Fed Bank President Richard Fisher will speak about interest-rate guidance in London today after saying March 5 that the central bank’s asset purchases were creating incentives for investors to take excessive risk. Fed Bank of St. Louis President James Bullard will speak in Washington. Dollar Support “The less-dovish-than-expected policy update from the Fed has helped to support the dollar,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

“The market’s still not fully pricing in expectations for rate hikes ahead from the Fed so there’s still scope for further yield rises in the U.S., which would be supportive for the dollar going forward.” The FOMC discarded a jobless-rate threshold at its two-day meeting this week for considering when to increase borrowing costs and said it will look at a wider range of data. Policy makers reduced monthly bond buying by $10 billion to $55 billion and said the purchases will be slowed in further measured steps. “We are in for a little bit of dollar strength,” said Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney.

“I’d imagine that what Yellen said about the six months was music to Mr. Fisher’s ears.” The dollar has appreciated 0.8 percent this week, the third best performer of 10 developed-nation currencies tracked by ForexSQ Correlation-Weighted Indexes. The yen fell 0.3 percent and the euro weakened 0.2 percent.

This article wrote by Fxstay for www.topforexbrokers.com