Dollar posts biggest weekly rise in 7 months on rate bets

New York

THE dollar consolidated gains on Friday (Jan 28) and posted its biggest weekly rise in 7 months as markets priced in a year ahead of aggressive hikes in US interest rates.

Money markets priced in a 28.5-basis-point interest rate hike in March and as many as 119.5 basis points in cumulative increases by year's end as the dollar steadily rose in a week highlighted by a more hawkish tone coming out of a Federal Reserve meeting.

The dollar index rose a scant 0.04 per cent. The index rose about 1.7 per cent for the week to mark its biggest weekly gains since June. It shot above 97 for the first time since July 2020.

US Treasury yields eased, with 10-year yields falling to about 1.77 per cent for the day, well below 2-year highs of nearly 1.9 per cent hit on Monday.

The 2-year Treasury yield, which often moves in step with rate expectations, slid 2.8 basis points to 1.164 per cent, but was still much higher for the week.

The euro nursed losses on Friday, little changed at US$1.1143, a bit up from Thursday's 20-month low of US$1.1131.

Major currencies drifted sideways in Asian trading before Chinese New Year holidays even though US yields were marginally higher.

The greenback is poised to gain further versus the euro and yen as the Fed raise rates but the European Central Bank and Bank of Japan likely to stand pat. The yen rose 0.14 per cent to 115.21 per dollar, while the Australian and New Zealand dollars languished, with the kiwi dipping slightly to a fresh 15-month low of US$0.6570.

Sterling was pushed to a one-month low of US$1.3360 on Thursday but has bounced back a bit as traders await the Bank of England's coming meeting. Rates markets have priced a 90 per cent chance of a hike. REUTERS