US dollar hits two-week high

London

THE US dollar strengthened to a two-week high versus a basket of major currencies on Monday, as market expectation builds that the Federal Reserve could taper its stimulus sooner rather than later despite a surge in Covid-19 cases.

The dollar index rose 0.3 per cent to 92.880 in early European trading hours, its highest level since Aug 27. It was last up 0.2 per cent.

A flurry of US economic data is due out this week, starting with US consumer price data on Tuesday, which will give a broad picture of the economy's progress ahead of the Federal Reserve's meeting next week.

The Philadelphia Fed president Patrick Harker became the latest official to say he wants the central bank to start tapering this year, saying in a Nikkei interview that he was keen to scale back asset purchases.

"The US dollar's recent rebound has coincided with more hawkish comments from Fed Presidents," FX analysts at MUFG said in a note.

The Wall Street Journal reported on Friday that Fed officials will seek to make an agreement to begin paring bond purchases in November.

Retail sales and productions figures are also slated for later this week.

The euro was among the currencies to lose ground to the US dollar, dipping 0.3 per cent to US$1.17750, its lowest level in a little over two weeks, after the European Central Bank said last week it would start to trim its own emergency bond purchases.

The yen also fell back around 0.2 per cent and was last at 110.100.

"A couple of dynamics favour the (US) dollar," said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

"Reopening still faces challenges from the consumer, who is cautious and from bottlenecks which restrict ability for the economy to rebound with some gusto.

"At the same time rising infections suggest we may still need to reintroduce restrictions of some sort. The other thing is that the Fed continues to signal that tapering is coming," he said. REUTERS