(Bloomberg) — The US dollar is rallying Monday after a US services gauge signaled the economy remains strong, further fueling bets the Federal Reserve will continue hiking interest rates.
The Bloomberg Dollar Spot Index rose as much as 0.8%, breaking a four-day losing streak following data that showed the Institute for Supply Management’s gauge of services rose unexpectedly in November. The broad dollar rally drove all Group-of-10 currency peers lower, with the Japanese yen the worst performer driven by higher US Treasuries and a paring of newly established speculative long positions. The euro erased earlier gains with losses limited by real money buying.
“Asset markets are very correlated right now and when you get good data in the US, then equities sell, rates rise and the USD rises with it, and vice-versa,” Brad Bechtel, a New York-based currency strategist at Jefferies, said in an email. “A lot of the moves we’ve seen the past few weeks will start unwinding a bit as we get closer to the US CPI print as investors square up ahead of the data.”
The dollar is rebounding from last week’s 1.3% drop. On Wednesday, a speech from Federal Reserve Chair Jerome Powell signaled a downshift in the pace of rate hikes while he said the fight against inflation is far from over. By Friday, the currency was able to end the day little changed after stronger-than-expected US jobs data once again reassured investors of future hikes ahead of the Fed’s December meeting.
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Source: Investing.com
