June 16, 2017
TOKYO (Reuters) – The dollar stood tall in Asia on Friday, on track for weekly gains against a currency basket, after upbeat U.S. economic data gave investors reason to hope the U.S. central bank will stick with its plan to hike rates.
The dollar index, which tracks the greenback against six major peers, added 0.1 percent to 97.474 <.DXY>, and was up 0.6 percent for the week.
On Wednesday, the U.S. Federal Reserve raised interest rates as widely expected, and also released some preliminary details of its plan to begin paring its $4 trillion-plus debt holdings.
Ahead of the central bank’s announcements, however, downbeat inflation and retail sales data earlier sent the dollar into a tailspin.
“The dollar now seems to be getting over its shock from the core CPI release,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.
He noted that the Federal Open Market Committee (FOMC) was relatively hawkish, releasing its plan for balance sheet reduction earlier than expected and keeping the interest rate outlook unchanged – despite market expectations for a slowing in the tempo of rate hikes.
“It will be increasingly difficult to short the dollar, he added.
Thursday’s run of U.S. economic data gave dollar bulls some reason for cheer. The Labor Department said initial claims for state unemployment benefits dropped 8,000 to a seasonally adjusted 237,000 for the week ended June 10, lower than the 242,000 that economists had predicted.
June readings of the New York Fed’s Empire State business conditions index and the Philadelphia Fed business conditions index also both surpassed economists’ expectations.
Higher yields underpinned the dollar. The benchmark U.S. 10-year Treasury yield
The dollar rose 0.2 percent to 111.11 yen
The BOJ is widely expected to maintain its ultra-easy monetary policy and reassure markets that it has no plans to hasten to follow the Fed’s tapering example.
Sterling edged up 0.1 percent to $1.2762
The unexpectedly tight 5-3 vote came despite signs of a slowdown in Britain’s economy, and uncertainty over Britain’s political outlook since Prime Minister Theresa May’s failure to win a parliamentary majority in last week’s election.
(Reporting by Tokyo markets team; Editing by Eric Meijer)
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