Recent encouraging economic data, such as a positive jobs report for January, helped the dollar to recover in February as raised expectations that the Federal Reserve will raise rates more than originally anticipated to combat inflation.
US interest rate futures have discounted the official Federal Reserve rate, which peaked at 5.4% in September, while rate cuts for this year have been largely ruled out. The Fed’s policy rate is currently in a target range of 4.50%-4.75%.
The dollar index, which compares the greenback against a basket of six major currencies, rose 0.22% to 104.88, adding a 2.7% rise in February, its first monthly increase since September.
Meanwhile, data on Tuesday showed signs that the Fed’s rate hikes were starting to have the desired effect of cooling the economy, which weighed slightly on the dollar.
“In a sea of grim news, US consumer confidence data was icy, good for fighting inflation, but at a significant implicit cost: a decline in consumer spending that accounts for about 70% of the country’s GDP. “, said José Torres, Senior Economist at Interactive Brokers.
US consumer confidence dropped unexpectedly in february, down to 102.9 from a reading of 106 in January. Economists polled by Reuters had forecast the index to be 108.5.
Another report showed that the US single-family home prices rose at their slowest pace in December since the summer of 2020, with the S&P CoreLogic Case Shiller National Home Price Index rising 5.8% year-over-year, the smallest annual gain since August 2020.
The greenback hit a more than two-month high against the Japanese yen earlier on Tuesday, rising to 136.93 yen, before reversing its gains after the US data. The greenback was then down 0.06% against the Japanese currency at 136.15. The yen also fell to its lowest levels in two months against the euro and sterling.
For its part, the euro lost 0.25% to $1.0583, after higher-than-expected inflation data in France, and sterling returned some of its gains from the previous session against the dollar, falling 0.09% to $1.2052.
Source: Ambito
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