US dollar rises after climbing to six-week high on retail spending

[SYDNEY] A US dollar gauge held above a six-week high reached Friday after the biggest increase in consumer spending in a year prompted some in the market to speculate that traders would boost the odds of a Federal Reserve interest-rate increase this year.

The US currency rose against the yen before minutes of the Fed's last meeting are released Wednesday. Australia's dollar touched the lowest in 10 weeks and New Zealand's currency declined following reports from China pointing to slowing growth in the Asian nation that both countries count as their biggest export market.

"We think the dollar would go up a little bit further this month," said Joseph Capurso, a senior currency strategist in Sydney at Commonwealth Bank of Australia.

The greenback will advance "as the market puts in a little bit more risk that the Fed hikes in 2016. There's hardly any pricing in at the moment."

The Bloomberg Dollar Spot Index rose 0.1 per cent as of 11:54 am in Tokyo, adding to a 2.3 per cent advance over the past two weeks which took it to its highest close since March 29 on Friday. The greenback rose 0.2 per cent to 108.88 yen and was little changed at US$1.1310 per euro.

China Growth

Australia's dollar rose 0.2 per cent to 72.85 US cents after sliding to as low as 72.37 US cents, the weakest since March 2. New Zealand's currency fell 0.1 per cent to 67.66 US cents.

China's stocks fell earlier after data showed an economic slowdown deepened and new credit slumped in Asia's largest economy. Industrial production, retail sales and investment in April all trailed estimates, data released Saturday showed, while new credit undershot predictions in an analyst survey after surging in March.

The US dollar gauge exceeded its 50-day moving average for the first time since February on Friday after data indicated retail spending will help the economy recover from an early year slowdown.

Futures traders assign a 4 per cent chance the Fed will raise rates from the current range of 0.25 per cent to 0.5 per cent in June and a 53 per cent probability of an increase this year. A year ago, traders were almost certain of a move in the second half of 2016.

A Fed repricing should mean a higher US dollar, though "it obviously won't be as strong as it was before because markets will be much more hesitant to go ahead of the Fed this time," said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland.

BLOOMBERG