SINGAPORE (Reuters) – The dollar was on the lookout for its first weekly rally in more than a month on Friday as a bet on another rate hike by the Federal Reserve in May. economic slowdown.
In Asia, Japan’s consumer price index held steady above the central bank’s target in March, pushing major indexes to 40-year highs, prompting the Bank of Japan (BOJ) to call for ultra-accommodative monetary policy. There was pressure for a change in policy stance.
The dollar fell against the Japanese yen in early Asian trading, but rose against most major currencies, with the US dollar index gaining 0.06% to 101.84.
An index that measures the US dollar against six major peers was set to rise by more than 0.2% each week after five straight weeks of declines.
Rising expectations that the Fed will raise interest rates by 25 basis points in May provide some support for the USD. Financial markets are pricing in an 84.5% chance of such a rate hike next month, compared to a 67% chance a week ago, according to the CME FedWatch tool.
Against the dollar, the euro fell 0.03% to $1.0967 and the pound fell 0.09% to $1.24325.
However, the US dollar’s gains plateaued as US data released on Thursday reinforced fears of a recession.
The number of Americans filing new claims for unemployment benefits rose modestly last week, suggesting a gradual slowdown in the labor market. Another report from the Philadelphia Fed said factory activity in the mid-Atlantic region fell to its lowest level in nearly three years in April.
“The US economy is headed for recession,” said Joseph Capruso, head of international and sustainable economics at the Commonwealth Bank of Australia (CBA). “We think we’re going into a recession, probably around the middle of this year.
“But the problem with the Fed is that inflation remains high, and I think the Fed will at least raise interest rates again.”
Japan’s economy is also showing signs of increasing price pressure, with Friday’s data showing the core consumer price index rose 3.1% year-on-year in March, the fastest annual pace in 40 years, excluding fuel costs. rose at
The dollar was last down 0.07% against the yen at 134.13.
Friday’s data may sustain market expectations that the BOJ may phase out large stimulus measures later this year, with all eyes on next week’s BOJ policy meeting.
“I don’t think Mr. Ueda will change his policy at the first meeting next week,” CBA’s Capruso said. …they will move in the next few months.”
In other currencies, Australia ended 0.07% lower at $0.6738 and the kiwi 0.12% lower at $0.61705.
Thursday’s data showed New Zealand consumer price inflation was weaker than expected in the first quarter but remained close to historic highs.
(Reporting by Ray Wee, Editing by Jamie Freed)