The dollar “rebounded” as expectations of a Fed rate hike increased

Singapore ( – Dollar rebounds in Asia on Monday afternoon, and hit a one-month high against the yen, as resilience in core US retail sales and impressive Wall Street bank profits raised market expectations for a rate hike from the US Federal Reserve in May.

While US retail sales fell more than expected in March, so-called core retail sales, which exclude autos, gasoline, building materials and food services, fell just 0.3 percent last month, according to data released on Friday. (14/4/2023).

And first-quarter 2023 profits from JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co were better than expected, dispelling concerns about a banking crisis that occurred in March.

Against the yen, the dollar rose to a one-month peak of 134.22 on Monday, with the Japanese currency under pressure as Japan’s central bank maintains a stance dovish-his.

Meanwhile, the US dollar index was steady at 101.65, standing some distance from Friday’s one-year low of 100.78.

Friday (14/4/2023) marked the fifth straight weekly loss for the index, as recent signs that inflation in the United States is cooling has raised expectations that the Federal Reserve will not have to raise interest rates as much as previously feared.

Elsewhere, the euro slipped slightly to 1.0986 dollars, while sterling fell 0.02 percent to 1.2412 dollars.

“US bank earnings came out much better than expected, which shows that the US economy is not doing so badly… So I think that will raise (expectations) for the Fed to continue raising interest rates,” said Tina Teng, market analyst at CMC Markets. .

Money markets are now pricing in about an 81 percent chance that the Federal Reserve will raise interest rates by 25 basis points next month, up from about a 69 percent chance last week.

Short-term inflation expectations have also increased, with a preliminary April reading by the University of Michigan showing that one-year inflation expectations rose to 4.6 percent from 3.6 percent in March.

US government bond yields remained high Monday, retaining most of Friday’s (14/4/2023) jump.

The yield on the two-year US Treasury, which usually moves in line with interest rate expectations, stood at 4.1161 percent, after hitting a roughly two-week peak of 4.137 percent Friday. The 10-year US Treasury bond yield was last at 3.5166 percent.

Some of the Fed talks are hawkish also aided expectations of higher interest rates, with Fed Governor Christopher Waller and Atlanta Fed President Raphael Bostic suggesting that the Fed could raise another 25 basis points next month.

In other currencies, the Aussie rose 0.01 percent to $0.67095 while the kiwi fell 0.19 percent to $0.61985.

In Asia, a slew of economic data out of China this week took center stage, as traders looked for clues on how the recovery in the world’s second-largest economy is faring.

“We expect the March activity data to show a moderate acceleration of growth momentum, but (not) may see a big positive surprise,” said analysts at MUFG.

Last week, China reported an unexpected jump in its exports in March, which jumped 14.8 percent from a year earlier, snapping a fifth straight month of declines.

The offshore yuan fell about 0.1 percent to 6.8786 per dollar.

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Translator: Apep Suhendar
Editor: Biqwanto Situmorang


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